Bank boss King is dragged into rate-fix scandal

THE Governor of the Bank of England was dragged into the rate-rigging row yesterday after it emerged he discussed Libor inter-bank lending rate concerns with a key US official four years ago.

An email trail released by the Bank shows Sir Mervyn King backed proposals from then president of the Federal Reserve Bank of New York, Timothy Geithner.

In one email to Mr Geithner, Sir Mervyn said: “The recommendation so proposed by the New York Fed seems sensible to us.”

He assured him the proposals would be put forward to the British Bankers’ Association (BBA) for a Libor system review.

It raises questions over why the BBA and British authorities did not get a handle on Libor fixing earlier.

Banking has been mired in controversy since Barclays’ £290million fine last month over its attempts to manipulate Libor from 2005 to 2009.

The scandal has claimed the scalp of Barclays’ chief executive Bob Diamond.

The Barclays rate rigging fine has prompted calls for a full review of Libor. It is set daily by panels of banks, with each stating a rate at which it believes it could borrow.

The Bank of England said: “Concerns about difficulties in setting Libor in the stressed market conditions of late 2007 and 2008 were widely expressed, although no evidence of deliberate wrong-doing had been cited.”

It said the BBA launched a review in June 2008 and had assured the Bank it would take on board Mr Geithner’s recommendations.

Yesterday a Commons inquiry into banking was branded a “total joke” after two top inquisitors – Labour MP John Mann and Tory MP Andrea Leadsom – were excluded. The inquiry will be chaired by Tory MP and Treasury Committee chairman Andrew Tyrie.