MPs have called for a new probe into the interest rate rigging scandal that led to the jailing of two bankers who ratted on Barclays.
It comes after the BBC uncovered tapes suggesting the Bank of England and senior government officials have been pressuring Barclays into manipulating interest rates.
MEPs on both the current and former Finance Committees are concerned that the wrong people may have been prosecuted.
The Serious Fraud Office told the BBC it had carried out a thorough investigation.
The calls for a new probe follow BBC Radio’s broadcast of an investigative podcast examining allegations by traders that they have been victims of a range of miscarriages of justice.
It revealed that two traders jailed for interest rate manipulation, Peter Johnson and Colin Bermingham, were the original whistleblowers in the scandal.
On Radio 4 podcast The Lowball Tapes, the BBC revealed leaked audio recordings and documents implicating both the Bank of England and the government in pressuring banks to manipulate interest rates.
The audio recordings and documents were never seen from a previous parliamentary inquiry into the scandal in 2012.
Much of the evidence was also never shown to the jury in nine trials of dealers and brokers that took place between 2015 and 2019.
A total of 38 traders were charged, 24 of them in the UK. After nine criminal cases on both sides of the Atlantic, eleven were convicted.
Andrew Tyrie, chairman of the committee that investigated the scandal in 2012, told the BBC if they had known what the BBC has since found out they would have investigated further and changed the context in which decisions were made, prosecuting 24 traders to pursue.
“People’s lives have been shaken badly. And they have had terrible experiences with the processes,” he said.
“As far as I can tell, the whistleblowers, as the name suggests, were trying to do the right thing. Whistleblowing is a crucial part of the investigative machinery. And it’s very important, it should work fine. And that doesn’t seem to be working in this case.”
The trial of the convicted traders was separate from any intervention involving the Bank of England. They were accused of conspiring to commit fraud by asking colleagues to revise estimates of interest rates up or down by a hundredth of a percentage point (known as a “basis point”).
What the FTSE 100 is to stock prices, Libor is to interest rates – an index that reflects the cost of borrowing. Every morning at 11 a.m. for almost 35 years, 16 banks have been answering a question: 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 arrive at Libor, short for ‘London Interbank Offered Rate’. To set Euribor, the process is similar but more banks are involved.
The evidence against the traders jailed for rate manipulation consisted entirely of demands they made to colleagues to tweak these estimated interest rates up or down, typically by a hundredth of a percentage point (known in money markets as a “basis point”). ).
The hope was that it could slightly shift the Libor average in the right direction to benefit the bank’s operations that went up or down in conjunction with Libor.
In the other form of interest rate manipulation, known as lowballing, banks pretend they can borrow cash much cheaper than they really can. It’s on a much larger scale.
Evidence preserved by Andrew Tyrie’s committee 10 years ago includes a tape known to regulators who appeared before the committee where Barclays trader Peter Johnson was told by his boss Mark Dearlove that the bank ” “I have experienced very serious pressure from the UK Government and the UK Government’s Bank of England about pushing our Libor down”.
However, those who gave orders from above have never been prosecuted.
The Lowball Tapes also reveal that Mr Dearlove says he was pressured directly earlier this month by then Bank of England Executive Director Paul Tucker that Barclays’ Libor rate should be “cut” because he receive government attention.
Evidence uncovered for the series also suggests that the Bank of England, as it attempted to deal with the credit crunch and subsequent banking crisis, intervened in the Libor setting process from August 2007.
Emails and affidavits, which were not shown to MPs or a jury, suggest that on August 14, 2007, the Bank of England first agreed that senior bank executives should collectively raise Libor because it was too low to meet the To reflect interest rates where cash changed hands. It then intervened, urging Barclays to lower its Libor filings on September 1, 2007 following speculation about the bank’s solvency.
It also shows that Barclays cash dealers Peter Johnson and Colin Bermingham had been trying to draw attention to lowballing throughout the crisis. But far from being thanked, they were prosecuted for a far smaller form of interest rate “manipulation” that is now not considered a crime in the United States
Barclays’ legal department, the UK regulator Financial Services Authority and the US Department of Justice all had access to this evidence. However, it was not mentioned in the decree notices published at the time and no one informed MEPs about it.
The call for a new investigation is supported by three other former and current members of the Finance Committee.
“It needs a new full, judge-led investigation,” said Kevin Hollinrake, a member of the Finance Committee and an activist against financial corruption. “You can’t have a situation where the rule-makers, the ‘masters of the universe’, stick to one set of rules and the rest of us stick to another.
“I don’t care who these people are: what level of government, what level of the Bank of England, or what level of the FCA – or what level of banks they work at. These people have to abide by the rules. So there should be an investigation and an investigation to see if they did it.”
Mark Garnier, who was a member of the committee in 2012 that was told the Bank of England had not pressured Barclays, said if he were chair of the Finance Committee now he would order hearings to find out the truth. Teresa Pearce, a 2012 member of the same committee, said the evidence uncovered by the BBC showed the inquiry needed to be reopened.
Paul Tucker has declined to comment in response to a BBC right of reply. Barclays did not respond to our request for comment, but former executives have denied they were pressured by the Bank of England to lower the Libor. The Bank of England has also denied pressuring banks, saying Libor was not regulated at the time.
The US Federal Reserve declined to comment. However, in a 2012 statement, she said she received “occasional anecdotal reports from Barclays on problems with the Libor” in 2007 and shared reform proposals with the relevant UK authorities.
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