Paul Tucker, the deputy governor of the Bank of England has denied an allegation that government ministers leaned on the Bank of England to lower Libor rates in October 2008.
Mr Tucker had submitted an urgent request to appear after a contemporaneous account of a conversation between Mr Tucker and Mr Diamond was published by Barclays last week.
Appearing before the Treasury Select Committee (TSC) yesterday, Mr Tucker contradicted comments made by the chancellor, George Osborne, that Labour officials had been involved in understating Libor.
Mr Tucker said he had had conversation with government officials but not with ministers. He said that during the whole period he had not had one conversation with Shriti Vadera at all. He was adamant that he had not spoken to Ed Balls either.
Mr Tucker did admit that the bank was concerned that Barclays could become the next bank to require a government bailout.
He said that the file note released by Barclays ahead of Mr Diamond’s appearance before the TSC last week of a conversation between Mr Tucker and Mr Diamond gave the “wrong impression”.
Mr Tucker said: "It should have said something along the lines of: 'Are you ensuring that you, the senior management of Barclays, are following the day-to-day operations of your money market desk, your treasury, are you ensuring that they don't march you over the cliff inadvertently by giving signals that you need to pay up for funds?'"
Mr Tucker and the Bank of England faced criticism from the committee for not being alert to the manipulation of Libor when it was occurring and not alerting regulators. At one point Andrew Tyrie MP said: “This doesn’t look good Mr Tucker.”
He added that he thought Mr Diamond’s decision to resign was correct because "absolutely decisive action was needed to start a new chapter".
However, Mr Tucker said that he would have alerted regulators if he had thought wrongdoing was occurring.
He said: “We thought it was a malfunctioning market, not a dishonest market.”
The MPs then accused the Bank of England of failing to accept any responsibility for the regulation of Libor. Again Mr Tucker defended the bank’s position by saying that that was not the bank’s role.
Mr Tucker said he did not know until recently that Barclays had been submitting low Libor quotes in October 2008 or had been looking to profit by submitting artificial bids earlier than that.
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