-Tucker Chaired Nov 2007 Meeting At Which Libor Rigging Was Discussed

By David Robinson and Les Commons

LONDON (MNI) – Bank of England Deputy Governor Paul Tucker, long
the BOE’s leading internal candidate for the top job when Mervyn King’s
term comes to an end at the middle of 2013, was fully aware from the
early days of the financial crisis that market participants believed
Libor was being rigged.

The minutes of a money markets group meeting chaired by Tucker
himself back up what a participant recalls privately, that there
were frank discussions dating back to 2007 involving Tucker about banks
submitting Libor rates below actual rates.

The BOE Sterling Money Markets Liaison Group is an interface
between the central bank and senior money market practitioners. Its
published minutes from the depths of the financial crisis shed light on
the current scandal that led to the resignation of Barclays Chief
Executive Bob Diamond Tuesday.

The Group’s November 2007 minutes, from a Tucker-chaired meeting,
state “Several group members thought that Libor fixings had been lower
than actual traded interbank rates through the period of stress.”

They add a cautionary note, saying “Libor indices need to be of the
highest quality given their important role as a benchmark for corporate

Tucker was the BOE’s Executive Director for Markets from June 2002
to February 2009, the job involved being on top of what has going on in
the money markets.

A file note released by Barclays on Tuesday dragged Tucker further
into the Libor rigging scandal. The note from former Barclays Chief
Executive Bob Diamond was dated Oct 29, 2008 and summarised a
conversation he had with Tucker.

Diamond claimed Tucker told him he had received calls from senior
government officials asking why Barclays was “always towards the top end
of the Libor pricing.”

Diamond replied that Barclays Libor rate was driven by its market
rate but they “continued to see others in the market posting rates at
levels that were not representative of where they would actually
undertake business.”

The minutes of the Sterling Money Markets Liaison Group show
this was far from the first time Tucker had heard such allegations.

The financial crisis hit home in the UK in September 2007, when
building society Northern Rock had to get liquidity support from the

As Libor rates moved higher, the allegation from market
participants that banks were quoting inaccurately low Libor rates gained
credence. The minutes show that not only was the issue raised back in
November 2007 but that the BOE went to great lengths as the crisis
deepened the following year to keep its finger on the money markets’

The Oct 20 2008 group minutes, which took place only days before
Tucker’s conversation with Diamond, show him thanking members “for their
participation in the recent daily teleconferences on market conditions”
while the June minutes that year showed Libor again on the agenda.

Diamond is set to appear before the Treasury Select Committee at
1300 GMT Wednesday.

The BOE announced Wednesday that Tucker “has made a request to
attend a hearing with the Treasury Select Committee as soon as possible
… in order to clarify the position with regard to the events
involving the Bank of England, including the telephone conversation with
Bob Diamond on 29 October 2008.”

Tucker is spoken of highly by many in the City for his intellect
and grasp of detail. Whatever defense he is going to make of his role in
the Libor affair, it looks unlikely to be based on ignorance of what was
going on.

–London newsroom 0044 20 7862 7491; email:

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