A co-ordinated drive by central banks and governments pressed lenders to manipulate the Libor and Euribor benchmark interest rates at the height of the 2008 financial crisis, an expose to be published next week alleges.
The allegations – which come in a new book by the BBC’s Economics Editor Andy Verity - point out this was at the same time that dozens of former traders were criminally prosecuted for much less serious rate “manipulation."
The new book, serialised in The Times, claims that investigating agencies, including the FBI in the US and Britain’s financial regulator, were told in November 2010 of an international drive to get Libor and Euribor rates down, regardless of the real cost of borrowing cash.
David Davis, the former Brexit secretary, has called for an inquiry into claims that “British and US authorities covered up state involvement in Libor-rigging and the scapegoating of low and middle-ranking bankers, some of whom have spent years in jail”.
The MP also expressed concerns in parliament that the Treasury select committee “may have been misled by state agencies about the knowledge and involvement of the state in setting false rates”.
Libor and Euribor, its European equivalent, were meant to reflect the rates at which banks could borrow from each other.
The evidence is set out in Verity’s new book, Rigged, which shows evidence of central banks pressuring commercial banks into publishing rates that were artificially low to calm panic in financial markets.
The investigation found evidence that in October 2008, the Bank of England and the European Central Bank, along with three European national central banks and the Federal Reserve Bank of New York, intervened in the setting of Libor and Euribor.
The UK government also allegedly was involved in pressuring banks to “manipulate” Libor — meaning, as defined by criminal courts, seeking to obtain movements in the benchmark while “disregarding the proper basis for setting Libor”.