LONDON (Reuters Breakingviews) - Libor-fiddling has momentarily recaptured its 2012 glory days. A leaked recording has re-opened the question of how much the UK regulator knew about action by Barclays and other banks to submit lowball interbank rates in 2008 – and what the penalty should be if the answer is “a lot”. In a way, though, it’s a redundant question. Libor has hit bank bosses – just not the right ones.
The recording, uncovered by the BBC, wraps some old revelations in new packaging. It suggests that a Barclays executive asked its Libor submitter to claim the bank could borrow at a lower rate than it actually could. It also revisits a conversation on Oct. 29 2008 between Bob Diamond, then head of Barclays’ investment bank, and the Bank of England’s then-executive director, Paul Tucker. A comprehensive report by UK lawmakers from August 2012 made it clear Tucker had expressed concern at Barclays’ Libor submissions, higher than those of its peers.
Even if a new enquiry established that Tucker had ordered Diamond to cut rates – which he denies - it wouldn’t necessarily matter. Then and now, keeping Libor rates artificially low could be defended on financial stability grounds. Had real rates been known, it could have caused even more panic. The central bank also kept quiet, for example, about 62 billion pounds of emergency funding pumped into Royal Bank of Scotland and Lloyds Banking Group in late-2008.
A legitimate question, which was never answered, is whether senior bank executives knew about individual acts of Libor manipulation for their institutions’ financial gain. Relatively junior traders who were imprisoned have long argued that their behaviour was condoned by higher-ups. Under UK rules, proving that a company’s “directing mind” – its senior staff – knew about wrongdoing has proved extremely difficult.
But bank bosses have got their comeuppance, in a way. Executives at big banks now face the senior managers regime, under which they can potentially be held criminally liable for staff misdemeanours. The furore over Barclays boss Jes Staley’s failed attempt to unmask a whistleblower suggests that bank boards no longer close ranks around executives. Britain is also looking at widening the 2010 Bribery Act to apply to fraud – which would have captured Libor. Closure over past misdemeanours is important; more so is the knowledge such a situation shouldn’t happen again.