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King: first I knew about Libor fixing was after Barclays' fine

Bank of England governor Mervyn King says Barclays 'sailed too close to the wind' and its board was in denial over the regulator's concerns.

 
King: first I knew about Libor fixing was after Barclays' fine

Bank of England governor Mervyn King told MPs today that although he knew of the authorities' 'deep concerns' about Barclays' culture he only learned the bank had deliberately rigged Libor rates a couple of weeks ago.

King said he was informed of the allegations in April 2010 and knew there was an issue with the accuracy of Libor reporting during the financial crisis when the market was 'dysfunctional'. But he claimed the first he knew of any wrongdoing was when the regulator released its report two weeks ago and fined Barclays £290 million.

'Concerns about what Libor meant is a million miles away from deliberate, deceitful manipulation of submissions in order to make financial gain,' he said. 'That's my definition of fraud.'

When asked why the American authorities were 'hungrier' for the story and 'more active' in pursuing claims about possible Libor manipulation, King stressed repeatedly that unlike the Federal Reserve Bank of New York, the Bank of England is not a regulator.

He added that when it came to an investigation into the concerns about Libor, the British Banker's Association (BBA) needed a 'nudge in the right direction', but that it worked hard to make a success of the consultation.

Claiming 'I don't want to blame anybody', King pointed out that Barclays had been 'sailing too close to the wind over a wide variety of areas' for many months.

'The culture of Barclays made regulating the bank extraordinarily difficult,' he said. The Libor scandal 'was not the straw that broke the camel's back, but perhaps a bale'.

His concerns mirrored those of FSA chairman Lord Turner, who said yesterday felt that Barclays had a 'culture of gaming' and was 'trying it on'.

Turner said he felt that trust had broken down between Barclays and the regulator, adding that the letter he sent to the bank highlighting his many concerns is 'the only letter of this sort that I have sent in my time as chairman'.

When commenting on the resignation of Barclays' chairman Marcus Agius, meanwhile, King said that like Turner and the chancellor he found out via the BBC website, which he thought was 'odd'.

He added that while 'an admirable thing to do', Agius had not thought through the consequences of quitting and that as chairman was not responsible for the bank's culture – that was the chief executive's responsibility.

Agius put any prospective chairman in a difficult position, King explained. They would either have to take the job on the basis that Bob Diamond resigns – which he subsequently did – or would have to buy into the chief executive with serious worries that should the ongoing investigation bring anything else to light later down the line it would tarnish their reputation.

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13 comments so far. Why not have your say?

vin gos

Jul 18, 2012 at 07:38

Reminds me of faulty towers, Emmanuel saying "I know nothing",It seems no one is incharge of banks.what an extraordinary state of affair,

but bonuses galore.

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Gonk

Jul 18, 2012 at 08:22

It is all very well for King to say that "the British Bankers Assn needs a nudge in the right direction", but Agius is chairman of that as well as Barclays Bank!

This whole industry has been tainted by a combination of massive economic incompetence by the last Labour Government and a handful of spivs in banking - it seems in Barclays in particular - dragging down the honest and sound majority in the sector.

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SMS

Jul 18, 2012 at 08:41

Another top over paid British senior manager who didn't know what was going on. What do these people think they are paid to do?

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John Pickford

Jul 18, 2012 at 08:49

We know nothing ?, pull the other one.

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Gordon Watson

Jul 18, 2012 at 09:03

It really is not satisfactory for the Governor of the Bank of England to admit he did not know the extent of the Barclay problem and claim he did not need to because he was not the Regulator. Previous Governors were never slow to "invite" senior bankers to their office for a "chat" so that the bankers were fully aware they were operating on or outside their acceptable remit and that if necessary action would be taken!

As far as Lord Turner is concerned his was a Political Appointment and the Governor should have been monitoring him.

I do hope Mervyn King's replacement comes from somewhere other than the Bank of England or the FSA and is a knowledgeable and fearless expert on banking.

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derek farman

Jul 18, 2012 at 09:11

Any of the spivs who may be found guilty of fraudulently rigging Libor should be personally fined, and very heavily. Also their bonuses and pensions should be stripped from them.

My guess is that it is not the overall culture of our banks which is necessarily at fault . It is the aggressive, domineering, fear provoking, greedy, individuals who sometimes fight their way to the top, and pervert the whole culture of their organisations.

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MoneyObserver

Jul 18, 2012 at 09:29

Angela Knight, CEO British Bankers Association was extraordinarily evasive in a TV interview when this story first broke, suggesting that the responsibilty for fixing of LIBOR had NOTHING to do with the BBA.

Paxman had to point out it is called the BBA LIBOR.

Why is she not in front of the MPs committee ?

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Enrico

Jul 18, 2012 at 09:31

I cannot believe the drivel that has left Kings mouth when he comes out with comments as per below:-

'Concerns about what Libor meant is a million miles away from deliberate, deceitful manipulation of submissions in order to make financial gain,' he said. 'That's my definition of fraud.'

My definition of fraud in this case is Libor was fixed deliberately,it was a deceitful manipulation of submissions in order to make financial gain.

Barclays changed the Libor figures to benefit.If thats not fraud I don`t know what is.

Yet another banker trying to cover up his buddies.

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RL

Jul 18, 2012 at 10:21

The Bank of England is always manipulating interest rates, that's their job.

Gonk, you miss the point. The BoE was no longer regulating the banks, that was the FSA's job. That's one of the reasons the last Government has significant responsibility for this mess and why the regulatory system is being changed and the FSA broken up.

That said it's remarkable that no one knew anything. After all the investigation into LIBOR fixing was widely reported some time ago (18 months?).Even I had noticed that! Why didn't Diamond or King dig further.. heads deliberately in the sand?

One unanwered question. If Barclays was systemically underreporting LIBOR why did the Governor through Tucker still think Barclays rates were high in October 2008? Something doesn't add up.

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Anonymous 1 needed this 'off the record'

Jul 18, 2012 at 10:45

Can someone explain what this news release means for Santander depositors?

Santander UK has repurchased bonds worth 2.375bn euros from holding company Banco Santander, Spanish daily Expansion reports.

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Anthony Tinslay

Jul 18, 2012 at 14:20

Anonymous 1 - Santander's action means nothing for their UK depositors. The Bonds were just a form of loan from the parent Bank to the UK subsidiary at a time when funds were needed for UK operations. Subsequent positive cash flow in the UK has enabled the bonds to be repaid/retired.

As far as King and Turner are concerned all they have really done is to acknowledge that Diamond/Barclays is the agreed fall guy and they can merely say we knew nothing and cover their backs. That action of course merely shows them both to be incompetant in their jobs and the basic responsibility lies with the Labour Government in setting up the tri-partitte form of supervision that allowed irregular behaviour to continue unchecked for so long in so many institutions, i.e. nobody was really in control!!

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MoneyObserver

Jul 19, 2012 at 09:53

King/Turner - after Diamond, theirs is yet another example of the skillfully employed "Murdoch Defence" (I wasn't made aware by others) - a strategy becoming increasingly popular with top people who are handsomely paid to ensure things go correctly but fail.

Perhaps someone could employ this defence retrospectively to demonstrate

the Titanic disaster had nohing to do with the Captain - actual phrases used by 'top failures' in the last 6 months could be used with the minimal adaption.

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Graham Barlow

Jul 23, 2012 at 14:05

Behind all of this denial is a monumental Political scandal which is too big for any of them to admit they were anywhere near it at the time. One after the other are all denying they knew anything, yet they were directly involved and PAID to do the jobs of surveilance in Banking. I believe they were leant on by faceless Politicians, and are too scared to Blow the whistle. in case the whole pack of cards comes down taking their Pensions with it.

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