Recording shows BoE pressured banks to lower Libor rates - BBC
A secret recording from 29 October 2008 could add to evidence the Bank of England pressured commercial banks to keep interest rates on the interbank market lower than they would otherwise have been, the BBC said.
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According to the BBC's Panorama programme, the recording calls into question testimony to parliament from former Barclays boss Bob Diamond and Paul Tucker, who later went on to become deputy governor at the Bank.
A 2017 report from the International Monetary Fund placed the value of contracts linked to Libor at roughly $300trn, such that small variations in that key rate can potentially lead to very large increases in funding costs for companies and individuals right around the globe.
Libor still determines the cost for many financial institutions and firms to access cash for very short-term needs.
Following the collapse of US investment bank Lehman Brothers on 15 September 2008, their access to those funds disappeared as liquidity dried up and markets, in effect, ceased to function.
Indeed, it was perhaps only after Lehman's fall that authorities - and investors - around the world woke up to the true extent and gravity of the situation as the demise of Lehman set-off a domino effect across the world.
As a result, the average rate for Libor shot higher from 2.175% in August 2008 to 3.044% in September but afterwards fell to 0.531%.
At the same time, the US Federal Reserve slashed its main policy rate, the Fed funds rate, from 2.0% at the start of August 2008 to a range of between 0.0% and 0.25% by the end of that same year, in a bid to avert the catastrophe that loomed.
A spokesperson from the Bank of England responded to Panorama, saying: "LIBOR and other global benchmarks were not regulated in the UK or elsewhere during the period in question. Nonetheless, the Bank of England has been assisting the SFO’s criminal investigations into LIBOR manipulation by employees at commercial banks and brokers by providing, on a voluntary basis, documents and records requested by the SFO.
"The Bank is committed to publishing materials relating to the SFO’s investigations into benchmark manipulation when it is appropriate to do so.
"Until the SFO’s ongoing prosecutorial activity relating to LIBOR and other benchmarks has concluded, the Bank is not in a position to publish these materials."