Parliament has been urged to investigate “damning evidence” that it may have been misled by the Bank of England over interest rate rigging.

Senior Conservative backbencher David Davis said new evidence cast doubt on statements to Parliament by its former deputy governor.

In a House of Commons debate he called for a renewed parliamentary inquiry into the scandal.

He was supported by former Labour shadow chancellor John McDonnell.

Mr Davis cited evidence given by the Bank of England’s former deputy governor, Paul Tucker, who told the Treasury in July 2012 he’d only come to learn about interest rate manipulation “in the last few weeks”.

“Yet there appears to be damning evidence this was untrue, including meetings, phone calls, and sworn testimony to US authorities,” Mr Davis said.

MP calls for Parliament probe of rate 'rigging' evidence
MP David Davis said parliament should investigate statements made about rate rigging by a former deputy Bank of England governor.

“It was also claimed that there were no Bank of England instructions to change Libor submissions,” he added. “But evidence uncovered by Mr Verity suggests this is also untrue.”

The evidence cited by Mr Davis suggests that Mr Tucker was aware of the most serious form of manipulation, called “lowballing”, as early as August 2007.

Banks have been fined billions of dollars by US and UK regulators for this practice.

During the financial crisis of 2007-09 banks routinely understated the interest rates they were paying to borrow cash – “lowballing”.

They did so when publishing daily estimates of their borrowing costs for the purpose of setting Libor, the benchmark interest rate that tracks the cost of borrowing cash between the banks.


What does ‘rigging’ Libor or Euribor mean?

What the FTSE 100 is to share prices, Libor is to interest rates – an index that tracks the cost of borrowing cash. For most of the past 35 years, 16 banks have answered a question every morning at 11am: At what interest rate could you borrow money?

They submit their answers (e.g. RBS estimates 3.14%, Lloyds 3.13% etc) and an average is taken to get Libor, short for “London Interbank Offered Rate”. To set Euribor, the process is similar but with more banks involved.

The evidence against the traders jailed for rate “rigging” consisted entirely of requests they had made to colleagues to tweak those estimated interest rates up or down, typically by one hundredth of a percentage point (known on the money markets as a “basis point”).

The hope was that it might shift the Libor average marginally in the right direction to benefit the bank’s trades which went up or down linked to Libor.

In the other form of rate rigging, known as lowballing, banks pretend to be able to borrow cash much more cheaply than they really can. It is on a much larger scale.


The evidence, which emerged in the course of research for a book I have written, casts doubt on the prosecutions of 37 traders and brokers for “manipulating” Libor and Euribor, the equivalent of Libor for euros.

It includes an email chain reporting a meeting on 14 August 2007, where Mr Tucker is said to have sworn senior bank executives to silence as they discuss how banks’ Libor estimates of the cost of borrowing are too low.

In sworn testimony, given in February 2011 to the US Department of Justice, senior Barclays executive Jerry del Missier says Paul Tucker told him on 1 September 2007 that Barclays’ should get its Libor rates down.

When former deputy governor of the Bank of England Paul Tucker was interviewed by the Treasury committee of MPs on 9 July 2012, he was asked when lowballing was first raised.

‘I mean, I wasn’t aware of allegations of, of, lowballing until … the last few weeks,’ he said.

Mr Tucker has been asked by the BBC to comment on this but has repeatedly declined.

Speaking in parliament, David Davis also said there had been “serial miscarriages of justice where 37 traders were prosecuted, 19 convicted and nine jailed simply for doing their jobs”.

He called for the Treasury Select Committee to investigate whether they had been misled.

Former Labour shadow chancellor John McDonnell said: “It’s very clear that the House has been misled from the evidence we’ve seen.”

He added: “These were egregious miscarriages of justice” and called for the Treasury Select Committee to examine it.

Speaking for the government, junior Treasury minister Andrew Griffith said the issues were whether state authorities were involved in lowballing, and whether the Treasury Select Committee had been misled. He said: “I like [Mr Davis] look forward to hearing the response of the Treasury Select Committee chair”.

Mr Davis also cited former Lord Chancellor Lord Mackay of Clashfern, who has said there are “serious questions” that are “worthy of the Supreme Court” about the law used to convict traders, nine of whom went to jail for a much smaller form of interest rate “rigging”, now not regarded as a crime in any jurisdiction but the UK.

Convictions of traders in US courts have been overturned after a US appeal court ruled last year that prosecutors had failed to prove the former traders had made or procured any false or misleading statements.

The Bank of England has been asked repeatedly by the BBC about this evidence, declining to comment except to say any claims about its role were “unsubstantiated”.

DISCLAIMER: The Views, Comments, Opinions, Contributions and Statements made by Readers and Contributors on this platform do not necessarily represent the views or policy of Multimedia Group Limited.

DISCLAIMER: The Views, Comments, Opinions, Contributions and Statements made by Readers and Contributors on this platform do not necessarily represent the views or policy of Multimedia Group Limited.