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Paul Tucker Libor emails reveal government’s rate-fixing concerns

Category : Business

Emails highlight cabinet secretary’s questions to deputy governor of the Bank of England over Barclays Libor rate

Paul Tucker and Bob Diamond emails
Paul Tucker and Jeremy Heywood emails

Sir Jeremy Heywood, the cabinet secretary, privately raised questions about the way Libor was being set during the 2008 banking crisis, according to a series of emails between him and Paul Tucker, the deputy governor of the Bank of England who is giving evidence to MPs on Monday.

Emails, obtained by the Labour MP John Mann through a freedom of information request, show that Heywood asked Tucker about the price at which Libor was being set during the 2008 crisis in a series of emails, including one marked “personal”.

The emails also show correspondence between Tucker and Bob Diamond, who at the time ran the investment bank Barclays Capital but resigned as chief executive of the overall bank last week in the wake of the negative publicity surrounding the £290m fine received by Barclays for attempting to manipulate Libor rates.

In one email to Diamond, dated 25 October 2008, Tucker writes in the subject field “Struck that your [government guaranteed bond] was issued at around 140 [basis points] over gilts”. In the body of the email, Tucker just writes “that’s a lot”. Diamond replies by offering to meet Tucker.

This email was sent just days before a note of a discussion between Tucker and Diamond that was discussed by MPs on the Treasury select committee last week when Diamond sent an internal email on 29 October 2008 detailing a conversation with Tucker. The email led to some confusion in the bank about whether the central bank was encouraging Barclays to cut its Libor submissions although when he appeared before MPs Diamond insisted he did not believe this to be the case.

However, Diamond said Tucker had told him “senior Whitehall figures” had been asking about the rate at which Barclays was borrowing, which has led to a race to establish whom these figures might be. Tucker also writes to Diamond to ask for a meeting about the sources of Barclays’ money market funding – which might have a bearing on the price at which its Libor submissions are made.

The emails published on Monday show correspondence between Heywood and Tucker. Heywood was mentioned this weekend as one figure who was interested in Libor.

The emails written by Heywood do not appear to show him encouraging Libor rates to be manipulated downwards. He is expressing concern that the rates for borrowing in US dollars are coming down faster than those in sterling. In one email, Heywood asks Tucker if he his hearing that Libor is high “because Barclays are bidding it”. Tucker replies that the Bank of England is monitoring the situation.

Mann, who obtained the information under FoI, warned the Bank of England about contempt of parliament as he had asked for the information ahead of Diamond’s appearance last Wednesday. He said he received the Bank of England’s response at 8.55am on Monday morning and he is now warning the Bank of England of the dangers of being seen to be in contempt of parliament. Mann said: “The information released today would have been critical for the Diamond meeting last week. They would have understood the urgency of the request and this clearly displays their contempt of the Parliamentary process.”

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