Barclays 'Misunderstood' Rate Call, Thought Bank Of England Had Instructed Them To Fix Libor Rate

Barclays: We Thought We Were Supposed To Lie
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A misunderstanding among Barclays staff led to them thinking that the Bank of England (BoE) deputy governor had instructed them to lie in their Libor submissions.

BoE deputy governor Paul Tucker spoke with a senior Barclays manager on October 29, 2008 in a routine telephone call.

In it, he made "no instruction for Barclays to lower its Libor submissions", the Financial Services Authority's (FSA) report on Barclays published on Wednesday said.

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But the report added: "However, as the substance of the telephone conversation was relayed down the chain of command at Barclays, a misunderstanding or miscommunication occurred.

"This meant that Barclays' submitters believed mistakenly that they were operating under an instruction from the Bank of England (as conveyed by senior management) to reduce Barclays' Libor submissions."

Submitters are the managers who give borrowing data to the British Bankers Association's Libor-setting committees.

It emerged on Wednesday that Barclays submitters had consistently told these committees that the bank was paying a lower interest rate to borrow from other banks than it really was.

The FSA report refers to "a telephone conversation between a senior individual at Barclays and the Bank of England during which the external perceptions of Barclays' Libor submissions were discussed".

A Bank of England spokesman confirmed that Mr Tucker was one of the parties involved.

He said: "The call referred to in the report was one of many regular market calls made by the Bank of England, in this case by Paul Tucker."

The US Department of Justice's 23-page Statement of Facts, an appendix to its agreement with the bank on its £290 million fine, also sheds some light on the October 29, 2008 conversation.

It said: "On October 29, 2008, a senior Bank of England official contacted a senior Barclays manager. The Bank of England official discussed the external perceptions of Barclays' Libor submissions and questioned why Barclays' submissions were high compared to other 21 Contributor Panel banks.

"As the substance of the conversation was passed to other Barclays employees, certain Barclays managers formed the understanding that they had been instructed by the Bank of England to lower Barclays' Libor submissions, and instructed the Barclays Dollar and Sterling Libor submitters to do so - even though that was not the understanding of the senior Barclays individual who had the call with the Bank of England official.

"Beginning on November 6, 2008, as a result of increased liquidity in the market, Barclays no longer needed to take into account the perceived instruction from the Bank of England."

A Barclays spokesman declined to comment.

The news comes as Marcus Agius, the chairman of Barclays, stepped down in the wake of the scandal.