Timothy F. Geithner sent Bank of England Governor Mervyn King recommendations in 2008 to revamp the London interbank offered rate, now at the center of a scandal over allegations the benchmark was manipulated.
King and Paul Tucker, at the time markets director of the U.K. central bank, passed the comments to the British Bankers’ Association, according to correspondence released by the Bank of England today. Geithner wanted procedures to prevent “misreporting,” and the BBA, which was reviewing Libor at the time, said it would take the recommendations on board.
The Bank of England has become embroiled in the rate- rigging scandal that led to Barclays Plc being fined a record 290 million pounds ($448 million) and cost Chief Executive Officer Robert Diamond his job. Members of Congress are seeking information from U.S. regulators about issue, while lawmakers in the U.K. are scheduled to hold hearings next week as they continue their own review.
At least a dozen banks are being investigated for manipulating Libor, the global benchmark for $360 trillion of securities. Tucker testified at the U.K. parliament’s Treasury Committee on July 9, while Andrew Bailey, head of the Prudential Business Unit at the Financial Services Authority, and FSA Chairman Adair Turner will attend the panel on July 16.
Geithner, the U.S. Treasury secretary who was president of the Federal Reserve Bank of New York at the time, sent the memo to King on June 1, 2008, after the two discussed Libor at a meeting of central bankers in Basel the previous month. The recommendations included one to “establish and publish best practices for calculating and reporting rates, including procedures designed to prevent accidental or deliberate misreporting.”
King forwarded Geithner’s message to Tucker, who shared them with Angela Knight. She was then the chief executive officer of the BBA, the lobby group which coordinates Libor.
“The bank was aware of the forthcoming BBA consultation and, despite not having any regulatory responsibilities in this area, was concerned that it be as comprehensive as possible,” the Bank of England said in a statement. “Both the bank and the Federal Reserve were assured by the BBA that it would take on board the recommendations, either through actions or through questions on which it would consult.”