So What Did Bank of England Know?
Byline: James Chapman Political Editor
PRESSURE was last night intensifying on the Bank of England over precisely how much it knew of Barclays' fixing of interest rates.
A phone conversation between deputy Bank of England governor Paul Tucker and a 'senior' manager at Barclays is said to have led to traders 'mistakenly' believing they were working under an instruction from the central bank to fix the Libor - the interest rate at which banks lend money to each other.
And last night it was suggested that Barclays chief executive Bob Diamond could give 'explosive' testimony about his discussions with the Bank when he appears before a committee of MPs later this week.
But the Bank of England categorically denied it had known anything about attempts to fiddle the rate.
The Daily Mail revealed on Saturday that rumours were swirling in Whitehall about what discussions the Bank and the Treasury had with banks about Libor.
The rate acts as a crucial indicator of the health of the banking sector, and therefore the wider economy. In 2007, experts began to express concern that the rate was rising, suggesting banks were becoming wary of lending to each other.
According to two separate official reports prepared on both sides of the Atlantic, a senior Barclays official and a senior figure at the Bank talked on October 29, 2008.
The Bank official is alleged to have asked why Barclays' Libor submissions were higher than those of other banks.
The Financial Services Authority's report on Barclays published on Wednesday said Mr Tucker spoke with a senior Barclays manager on October 29 in a routine telephone call.
In it, he made 'no instruction for Barclays to lower its Libor submissions'.
But the report added: 'However, as the substance of the telephone conversation was relayed down the chain of command at Barclays, a misunderstanding or miscommunication occurred. 'This meant that Barclays' submitters believed mistakenly that they were operating under an instruction from the Bank of England (as conveyed by senior management) to reduce Barclays' Libor submissions.' Submitters are the managers who give borrowing data to the British Bankers Association's Libor-setting committees. …