–BOE’s King Endorses Tucker Role In Libor Saga, Version Of Events

LONDON (MNI) – Bank of England Governor Mervyn King is defending
the role played by the BOE in the Libor-rigging scandal, portraying the
central bank as pushing hard for reform of the way Libor rates were
fixed.

King denied the BOE was tipped off back in 2008 by the New York
Federal Reserve over “wrongdoing” in Libor, despite a published e-mail
trail showing the NY Fed raising concerns then about ‘misreporting’ of
Libor. King argued that the Fed had instead highlighting weaknesses in
the way Libor was set and the BOE pushed for the British Bankers’
Association to undertake thorough reform.

In evidence to the Treasury Select Committee King was sharply
critical of the British Bankers Association, which is responsible for
setting Libor. King said he passed on the NY Fed concerns, headed at the
time by now US Treasury Secretary Tim Geithner, to the BBA and their
response was inadequate.

King said the e-mails from Geithner on Libor reform, which were
recently published by US media outlets, were forwarded to the BBA and we
said, “we wanted them to take account of this in their forthcoming
consultation.”

King also defended the role of the BOE Deputy Governor, and his
heir apparent, Paul Tucker saying he had helped drive through change in
Libor setting.

“After consultation with me Paul Tucker had talked to the BBA, and
urged them to have a widespread consultation about Libor fixing,” King
said.

King said they urged the BBA to restore faith worldwide in Libor.

“Paul spoke to the banks. We put senior people in each bank
involved and in charge of the consultation,” he said.

Questioned over whether the BOE made sure things the changes it
wanted did take place back in 2008 King said “It did happen and we
followed it up and the Bank and the FSA went to various meetings with
the BBA.”

He described the BBA’s May 2008 report on Libor reform as 2wholly
inadequate.”

“I asked Paul … what we would do about it.”

“They then formed a team of people which liaised right through that
summer with the BBA, the FSA and the New York Fed to ensure the
consultation was wide ranging,” he said.

Tucker himself highlighted how active he had been in the reform in
his evidence to the TSC.

“In May we wanted, the bank wanted, the banks generally to
participate in this review at a more senior level and therefore we
decided to call each of the big sterling banks at number two or number
three level and we wanted that to be understood at the treasurer level
that they needed to participate,” Tucker said.

King’s defense of the BOE rests in large part on the difference
between wrongdoing and problems in setting Libor back in 2008 during
heightened market stress, with the central bank aware of the latter
problem but not the former.

“There is a world of difference between people saying they do not
know how to submit when they are doing the Libor submissions, because
the market is dysfunctional … and deliberate misrepresentations with a
view to a financial gain,” King said.

Pressed on his view of Tucker’s behaviour during the key periods
concerning the Libor inquiry in 2007 and 2008, King said he trusted
Tucker to go out and do his job and did not monitor his every phone call
and conversation with the banks.

-London newsroom: +44 20 7862 7491; email: drobinson@marketnews.com/
dthomas@marketnews.com

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