Labour has demanded a full public inquiry into allegations of Bank of England involvement in the manipulation of the inter-bank lending rate, Libor.
Shadow chancellor John McDonnell was reacting to a report by the BBC’s Panorama which was based on a recording it had obtained detailing a 2008 conversation between a senior Barclays manager and its Libor submitter.
The programme said the comments suggested the Bank had exerted pressure on lenders to reduce the rate – used globally to determine the cost of financial deals, including mortgages.
In the recording, the manager reportedly told the submitter that he needed to lower his Libor rate, saying: “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.”
The recording emerged after eleven banks and other financial institutions – including Barclays – were fined by regulators for their alleged roles in the Libor scandal.
The Serious Fraud Office (SFO) has led a series of prosecutions against individuals, with eight defendants being cleared and five convicted to date.
The Bank of England told the programme: “Libor and other global benchmarks were not regulated in the UK or elsewhere during the period in question.
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“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.
“The Bank is committed to publishing materials relating to the SFO’s investigations into benchmark manipulation when it is appropriate to do so.
“Until the SFO’s ongoing prosecutorial activity relating to Libor and other benchmarks has concluded, the Bank is not in a position to publish these materials.”
Mr McDonnell said: “This is an extremely serious revelation that contradicts past assurances about the role of the Bank of England in the Libor scandal.
“It goes to the very heart of whether our financial institutions can be trusted.
“Therefore it warrants an immediate high-level investigation, and the Chancellor must act straight away to ensure this happens.”
The Liberal Democrats later added their voice to calls for an investigation while Tory MP and Treasury Select Committee member, Chris Philp, pondered whether the Bank has misled parliament in earlier testimony to the committee.
He argued that the evidence – along with the suggestion of support for manipulation from the-then Labour Government – merited an inquiry.
A Treasury spokesperson said: “The Government is absolutely clear that we must learn from the lessons of the past.
“That is why, since the financial crisis, we have carried out wholesale reform of how the financial system is regulated in this country, including making the manipulation of Libor a criminal offence.
“We will continue work with the UK’s independent regulators to ensure that the our financial sector operates to the highest possible standards.”
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