'Critical' Bank of England emails to Barclays released

 

A batch of "critical" emails sent from the Bank of England deputy governor Paul Tucker to former Barclays boss Bob Diamond were released today ahead of a highly anticipated hearing on the Libor-fixing scandal.

The correspondence appears to provide further evidence of Mr Tucker's concerns over Barclays financial health at a time when the bank was accused of manipulating its Libor submissions.

In one email, Mr Tucker said he was "struck" that Barclays had issued a government-guaranteed bond with a high yield, which could be a sign that Barclays was struggling to secure funding. "That's a lot," Mr Tucker added.

Mr Diamond last week released a note of a phonecall with Mr Tucker, who will appear before the Treasury Select Committee to clear up his role in the affair later today, which ultimately led to the Bank lowering its Libor submissions.

Committee member John Mann MP, who obtained the emails under a Freedom of Information request, said the messages were "critical" and accused the Bank of stalling in handing them over.

An additional email exchange disclosed by Mr Mann confirms Sir Jeremy Heywood, the then Downing Street chief of staff, raised concerns over the high rate of Libor submissions in the UK, compared to the US.

Sir Jeremy forwarded a note from UBS to Mr Tucker, in which the Swiss bank advocates "speeding up" the gradual decline in the interbank lending rate in the emails sent in late October 2008.

In the phone call disclosed by Mr Diamond, Mr Tucker, a forerunner for the position of Bank Governor when Sir Mervyn King steps down, relayed concerns by "senior Whitehall figures" that Barclays' Libor rates were higher than other banks.

The American banker said Mr Tucker did not reveal who the Whitehall figures were, but he took them to be "officials within the Government".

Mr Diamond, who resigned with immediate effect last Tuesday, told MPs he was left "confused" by the contentious phone call with Mr Tucker.

But despite being unclear about his motives, Mr Diamond said his reaction to the conversation was "appreciation of Paul Tucker for doing his job".

Mr Diamond said there were 14 or 15 other banks, including nationalised lenders such as Royal Bank of Scotland, which he knew had a weaker financial position than Barclays and were still submitting lower Libor rates.

Outlining his interpretation of Mr Tucker's comments, he said: "He felt that our Libor rates, relevant to the other 15 posters, could be lower."

But he insisted he did not feel that any action had been requested.

"I didn't feel it was an instruction," he said.

However, Mr Diamond's account of the conversation ultimately led to the then president of investment banking arm Barclays Capital, Jerry del Missier, telling staff to submit lower Libor.

Meanwhile, the fierce debate over banking ethics continued as Labour leader Ed Miliband unveiled his vision for change in the banking sector.

In a speech, he pointed to the Libor rate-fixing scandal as vindication of his much-criticised attack last year on "predatory" capitalism and promise wide-ranging action.

Mr Miliband said he would like to see Britain's top five high street banks broken up and forced to sell up to 1,000 branches to pave the way for two new privately-run challenger banks to bolster competition in the sector.

Lloyds Banking Group is already selling off more than 600 branches, with Co-operative Bank currently in exclusive talks to form what would amount to one of the challenger banks included in Mr Miliband's overhaul.

The Opposition leader also wants a new code of conduct for the banks to follow.

In addition, Mr Miliband would like to see a specialist banking unit set up with the Serious Fraud Office to tackle the "weak and fragmented" approach to fraud investigations.

As the debate continues, pressure continues to build on Mr Diamond to waive at least part of a reported £17 million golden parachute deal, while the bank also considers spinning off Barclays Capital.

The bank's board is understood to have had discussions with the Association of British Insurers, the trade group which represents billion of pounds of pension funds' investments, over plans to open negotiations with Mr Diamond over his exit pay.

Marcus Agius, who also announced his intention to step down but will remain until Mr Diamond's successor is found, will give evidence to MPs tomorrow but is likely to tell them nothing has been decided.

On Friday, the Serious Fraud Office launched a criminal investigation into alleged Libor-rigging at Barclays and the wider industry.

PA

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