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Former Barclays CEO answers questions on LIBOR rate fixing

Stephen Beard Jul 4, 2012

Jeff Horwich: Yesterday Bob Diamond resigned as CEO of Barclays Bank, and this hour he’s sitting before a Parliamentary committee in London. Parliament is investigating the possible manipulation of interest rates by Barclays and other banks. The central issue emerging this morning is deciphering this game of telephone that transpired between Barclays and the Bank of England — out of which somebody got the idea to adjust the so-called LIBOR interest rate.

Marketplace’s Stephen Beard is live with me from London, following this story. Hello Stephen.

Stephen Beard: Hello Jeff.

Horwich:  So, we’ve gotten a chance now to hear from Bob Diamond — what’s he saying?

Beard: Right. Well, he admits there was reprehensible behavior by some people in the bank but — so far at least — he clearly has not included himself in that assessment. He says that Barclays is in the flame now; Barclays is getting all the heat, because Barclays has been the first of the 16 banks involved in the LIBOR rate-setting system to be found guilty, and to be fined.

Bob Diamond: I think there has been an unfortunate series of events around Barclays being identified as the first bank in what was, you know, a report that clearly showed very, very bad behavior by groups of people.

Horwich: So Stephen, what does Diamond say about this claim that he was pressured somehow by the Bank of England to lower this interest rate?

Beard: He says that he did not take the remarks by this senior Bank of England official, Paul Tucker, in a phone call, as an instruction to lower the interest rate. And in a statement, Barclays has said that it was the chief operating officer who took the transcript of the phone conversation and acted on it.

This is still pretty murky stuff, Jeff. I mean, we have to ask ourselves the question: Why did Barclays actually reveal the details of this phone call between the Bank of England official and Bob Diamond if they didn’t want to raise the notion that there had been some pressure from the Bank of England.

Horwich: Right, it’s juicy, that’s for sure. What do we know of what the Bank of England itself is saying?

Beard: Well the Bank of England is insisting that it did not in any way encourage Barclays to manipulate the LIBOR interest rate. Barclays has said that Paul Tucker, the deputy governor, has insisted on being called before this Parliamentary committee to make this very point.

Horwich: Another front it the Barclays saga today: all of these class action suits. What’s up with that?

Beard: Yes. A number of class action lawsuits against the banks involved in the rate setting system; these representing U.S. municipalities, pension funds, insurance companies, and other corporations who believe that because their loans or their deposits were pegged to the LIBOR, they lost out. Lawyers involved say it could involve tens of billions of dollars in damage.

Horwich: Marketplace’s Stephen Beard in London, thank you very much.

Beard: OK Jeff.

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