LONDON (MNI) – The Bank of England, under intense scrutiny over its
role in the Libor scandal, has released copies of e-mails between former
New York Federal Reserve head Timothy Geithner and Govenor Mervyn King,
showing King endorsing the Fed’s proposals for Libor reform.

The e-mails, dating back to 2008, also show the BOE was assured by
the British Bankers Association, which sets the Libor rates, that the
BBA was prepared to implement Libor reform despite problems with “vested
interests.” They portray the BOE as aware of problems in Libor setting
and pushing hard for change.

The e-mails, which follow leaks in the US media, show the BOE
pushing for reform in the way Libor rates are set despite having no
direct regulatory responsibility. They also leave hanging the question
of why, when the authorities were looking at comprehensive Libor reform
back in 2008, so little has changed since then.

In one e-mail, dated June 1, 2008, Geithner refers to a
conversation he had with King in Basel about Libor. He sets out a series
of proposals from NY Fed staff for Libor reform.

King replies “The recommendations proposed by the New York Fed seem
sensible to us” and he says he told Paul Tucker, now BOE Deputy Governor
and a man in the eye of the Libor storm, to discuss them. The e-mail
trail shows Tucker called BBA head Angela Knight.

The BBA was conducting a Libor review and on June 3, 2008 Knight
told Tucker “changes are being made to incorporate the views of the Fed.
There is no show stopper as far as we can see.”

She adds, however, “as you know there are a lot of vested
interests.”

The BOE on Friday issued a statement explaining its actions. It
said with market conditions stressed in 2007 and 2008 the BBA had
launched a review into Libor setting.

“The Bank was aware of the forthcoming BBA consultation and,
despite not having any regulatory responsibilities in this area, was
concerned that it be as comprehensive as possible,” the central bank
said in a statement.

“Both the Bank and the Federal Reserve were assured by the BBA that
it would take on board the (Fed) recommendations, either through actions
or through questions on which it would consult,” the BOE added.

The BBA ended up publishing a consultation paper on Libor reform on
June 10, 2008.

–London newsroom: 00 44 20 7862 7491; e-mail: drobinson@marketnews.com

[TOPICS: M$$BE$, MMUFE$]