-BOE Sought To Distance Itself From BBA Libor Reform In 2008
-BOE, NY Fed Sought To Influence BBA Reform – Without Fingerprints

LONDON, (MNI) – A slew of e-mails released by the Bank of England
Friday provide no clear evidence that the NY Federal Reserve tipped the
BOE off to Libor rigging back in 2008 and show the central bank
publicly distancing itself from the proposed Libor reforms of the
British Bankers Association.

But the correspondence underline concerns at the two central
banks that Libor governance needed to be strengthened to maintain its
credibility and that the BOE was concerned to maintain London’s position
as a leading financial centre.

Senior BOE officials appeared to feel that it would be a mistake to
lend a central bank ‘imprimatur’ to Libor as opposed to other
alternative or competing rates in the markets, such as OIS-based rates.

The BOE had reservations about the reforms the BBA was proposing to
improve the credibility of Libor. The e-mail trail shows that despite
being heavily involved in consultation over Libor reform, top Bank
officials pushed to get any reference to the BOE in relation to the
reforms removed by the BBA.

In one such note, Governor Mervyn King asks Paul Tucker (then
executive director markets) to meet with Angela Knight (head of the
British Bankers’ Association) “to impress on her the need for greater
energy in BBA’s response and to make clear that we would not stand in
the way of alternative market initiatives to provide alternatives to
LIBOR”.

The BOE, commenting on the e-mails, has stressed the difference
between NY Fed highlighting the inadequacies of the Libor fixing regime
and actual wrongdoing by banks.

Both BOE Governor Mervyn King and Deputy Governor Paul Tucker, long
King’s heir apparent, have both publicly strongly denied they were aware
of Libor rigging.

The closest that the Fed’s side of the correspondence comes
anywhere close to that is when it talks about reforms which would
tackle incentives for misreporting, although its stops short of making
clear if Libor is actually being misreported.

Tucker and other officials at the BOE also pushed for Libor panels
to be upgraded by having bank treasurers rather than heads of treasury
trading responsible for Libor submissions.

In one e-mail King describes the BBA’s proposed Libor reforms as
“wholly inadequate.”

In another e-mail, date June 6 2008, senior BOE official Michael
Cross tells the Bank’s governors, Tucker and others that “the BBA is
close to desperate for even a small hook to imply that there will be a
dialogue with central banks (on Libor reform).”

Cross says, however, that all references to the BOE and other
central banks have been removed and a reply from King’s office says the
governor “agreed with the approach”.

King “agrees the BOE references should be removed,” the e-mails
says.

The emails also show the Swiss National Bank cited as wanting to
keep an eye on the ongoing BBA proposals for Libor reform.

–London newsroom 0044 20 7862 7491; email: drobinson@marketnews.com
dthomas@marketnews.com
[TOPICS: M$B$$$,M$$BE$]