Bank of England implicated in Libor rigging scandal by secret recording, BBC reports

According to the BBC, the 2008 recording adds to evidence that the central bank repeatedly pressured commercial banks to push their Libor rates down during the financial crisis

Libor, or the London Interbank Offered Rate, is the rate at which banks lend to each other and it sets a benchmark for a whole host of financial products, including mortgages and loans for retail customers (Getty)

A secret recording obtained by the BBC allegedly implicates the Bank of England in a major interest rate rigging scandal.

According to the broadcaster, the 2008 recording adds to evidence that the central bank repeatedly pressured commercial banks to push their Libor rates down during the financial crisis.

Libor, or the London Interbank Offered Rate, is the rate at which banks lend to each other and it sets a benchmark for a whole host of financial products, including mortgages and loans for retail customers.

The BBC says that in the recording, Mark Dearlove, a senior Barclays manager, instructs Libor submitter Peter Johnson, to lower his Libor rates.

He tells him: “The bottom line is you’re going to absolutely hate this... but we’ve had some very serious pressure from the UK government and the Bank of England about pushing our Libors lower.”

Mr Johnson is heard objecting on grounds that this would mean breaking the rules for setting Libor, which required him to put in rates based only on the cost of borrowing cash.

Mr Johnson says: “So I'll push them below a realistic level of where I think I can get money?”

His boss Mr Dearlove replies: “The fact of the matter is we've got the Bank of England, all sorts of people involved in the whole thing... I am as reluctant as you are... these guys have just turned around and said just do it.”

The BBC said that the recording calls into question evidence given in 2012 to the Treasury select committee by former Barclays boss Bob Diamond and Paul Tucker, who later became the deputy governor of the Bank of England.

The phone call between Mr Dearlove and Mr Johnson took place on 29 October 2008, according to the BBC. The broadcaster says that this was the same day Mr Tucker, who was at that time an executive director of the Bank of England, phoned Mr Diamond and discussed Barclays' Libor rate.

Mr Diamond and Mr Tucker were called to give evidence before the Treasury select committee in 2012. Both said that they had only recently become aware of lowballing – the term used to describe banks setting artificially low Libor rates.

In a statement to the Independent, the Bank of England said that “Libor and other global benchmarks were not regulated in the UK or elsewhere during the period in question”.

“Nonetheless, the Bank of England has been assisting the SFO's criminal investigations into Libor manipulation by employees at commercial banks and brokers by providing, on a voluntary basis, documents and records requested by the SFO,” it added.