by Mish

Banks lowballed their borrowing rates so as to make their financial conditions look better than they were.

LIBOR stands for London Interbank Offered Rate, the average of interest rates estimated by each of the leading banks in London that it would be charged were it to borrow overnight from other banks.

In June 2012, multiple criminal settlements by Barclays Bank revealed significant fraud and collusion by member banks connected to the rate submissions. The LIBOR rigging admission cost Barclays’ CEO, Bob Diamond, his job. Two traders went to jail.

The Bank of England officer who was in talks with Bon Diamond at the time, Paul Tucker, denied to the parliament in 2012 allegations that he put pressure on Barclays to rig LIBOR to ease funding tensions.

Today, However, the BBC reports Bank of England Implicated in Secret Recording.

A secret recording that implicates the Bank of England in Libor rigging has been uncovered by BBC Panorama.
The 2008 recording adds to evidence the central bank repeatedly pressured commercial banks during the financial crisis to push their Libor rates down.

The recording calls into question evidence given in 2012 to the Treasury select committee by former Barclays boss Bob Diamond and Paul Tucker, the man who went on to become the deputy governor of the Bank of England.
In the recording, a senior Barclays manager, Mark Dearlove, instructs Libor submitter Peter Johnson, to lower his Libor rates.
“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 objects, saying 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.
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.”

Mr. Dearlove declined to answer questions from BBC Panorama.
The phone call between Mr. Dearlove and Mr. Johnson took place on 29 October 2008, the same day that Mr. Tucker, who was at that time an executive director of the Bank of England, phoned Barclays boss Mr. Diamond. Barclays’ Libor rate was discussed.

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.
Peter Johnson, the Barclays Libor submitter, was jailed last summer after pleading guilty to accepting trader requests to manipulate Libor.

However, the jury could not reach a verdict on two other traders then on trial, Ryan Reich and Stelios Contogoulas. The Serious Fraud Office requested a retrial which concluded last week. Both Mr. Reich and Mr. Contogoulas were unanimously acquitted.
Panorama also played Mr. Contogoulas the October 2008 recording. He said he believed that if it had been played during the criminal trials it might have affected the outcomes.

He said: “That’s the thing, you know in these trials that we went through they separated everything, separated trading requests and lowballing. So anything that has to do with this they don’t go in. So you’re asking me do I think that if all this was in would it make a difference? Probably, is the answer.”

So, they jail one pressured trader but not the CEO nor anyone at the BOE. Lovely.

Mike “Mish” Shedlock

Word of the Day “Action”: Stimulus “Whatever It Takes” Bank of England Style

As expected, the Bank of England cut interest rates today to 0.25% from 0.5%.

Baroness Altmann Blasts Bank of England for Pushing Pension Schemes “Over the Edge”.

Baroness Altmann, a UK pensions expert, was brought into the British government in 2015 by David Cameron, then prime minister.

Deutsche Bank Received Special Treatment by ECB in Stress Tests, Bank of England Complains

Under ECB stress test rules, bank asset sales must be booked (not just expected to close) to count. Numerous EU banks had asset sales pending but the ECB ignored its own rules in just one case: Deutsche Bank.

Record Low US Rig Counts: Rig Count Capitulation?

Baker Hughes Rig Count Data shows the total U.S. rig count is 480, down by 9 in the last week. North American rig counts declined by 40 to 578. Canada accounts for 31 of the North American decline.

Investigating Deutsche Bank’s €21 Trillion Derivative Casino in Wake of Admission it Rigged Gold

Deutsche Bank has admitted it rigged both the Gold market and the Silver market. ZeroHedge has the details in his report Deutsche Bank Agrees To Expose Other Manipulators.

“Eurozone Will Collapse” Says Former Head of Bank of England: “It’s Real Hell”

Mervyn King, former head of the Bank of England, has written a book that explains why the Eurozone will collapse.

UK Reader Anecdotes on the LIBOR Scandal

In response to Secret Recording Implicates Bank of England in Libor Rigging I received an email from a UK reader working closely with a financial institution during the crisis.

Rigged System: Fake Risk, Fake Return

Is the system rigged? If so, is this the end of volatility? Axel Merk explores those questions in this guest post.

Diving Into Deutsche Bank’s “Passion to Perform” Balance Sheet

Deutsche Bank shares have collapsed to lows deep under crisis lows and collapse of Lehman in the Great Financial Crisis. What’s going on?