Evidence shows that the Bank of England Governor Sir Mervyn King was emailed by US Treasury Secretary Timothy Geithner, warning him of irregularities in the Libor rate.
In June 2008, Mr Geithner called for measures to ‘eliminate [the] incentive to misreport’ the rate, which measures how much banks operating in London are paying to borrow from each other.
Concerns over Libor manipulation were widespread as early as May 2008.
Mr Geithner, then head of the New York Federal Reserve Bank, sent a memo to Sir Mervyn calling for a ‘more credible reporting structure’ and broadening of the number of banks that were included in the measurement of Libor.
His memo outlined a six-point plan to overhaul the Libor process and strengthen governance.
However, Bank of England claimed that they had not been informed of any evidence of wrongdoing.
The Bank said the British Bankers’ Association had launched a review of the process in June 2008 and assured the Bank it would ‘take on board the recommendations’ from Mr Geithner.
The Bank published its own correspondence, showing that Sir Mervyn told Mr Geithner his proposals were ‘sensible’ and passed them on to the BBA.
In an email to deputy governor Mr Tucker on June 3, 2008, the chief executive of the BBA, Angela Knight, wrote that ‘changes are being made to incorporate the views of the Fed’
Barclays has faced a fine of 290m Euros for fiddling Libor, and several other banks are under investigation for their involvement in the scandal.
The Libor rate is a key interest rate set in London, which affects the price of trillions of pounds worth of mortgages, loans and other financial products around the world.
So far the scandal has affected London, with public outcry that regulation in Britain was lax. But concern has grown about the wider impact on consumers and the involvement of U.S. regulators.
Barclays is already feeling the effects of the scandal as it lost its first major deal yesterday as the state-backed Japan Bank for International Cooperation pulled out of a bond issue worth $1bn.