Nobody ever thought Barclays was the only bank fixing Libor

Those in charge always knew that other banks were involved. So why have they got away so far?

Over the weekend, it became clearer than ever that Barclays were not the only bank involved in Libor rate-fixing, a fact which will have ramifications for the future of Paul Tucker, the Bank of England official tied up in the scandal, but also raises further questions about the proporitionality of the response, both official and popular.

A bumper report from the Sunday Telegraph's Philip Aldrick details the smoking gun:

The 2011 report by the Financial Services Authority into the collapse of Royal Bank of Scotland in early October 2008, three weeks before Tucker’s call with Diamond, makes clear the lender had lost its access to the money markets, noting that the “liquidity run reached extreme proportions”.

"On 7 October, 2008, RBS’s wholesale counterparties, as well as, to a lesser extent, retail depositors, were simply not prepared to meet its funding needs and RBS was left reliant on ELA from the Bank of England," wrote the FSA.

The reference to ELA, or Emergency Liquidity Assistance, is important as Tucker, unlike the rest of the market at that stage, would have known that the Bank of England had begun providing secret loans, first to crisis-ridden HBOS and then to RBS, that totalled nearly £62bn.

Speaking to the Treasury Select Committee in November 2009, Tucker told the MPs that without the emergency loans it “would have been a lot worse than it would have been” otherwise. “This was a classic lender of last resort operation,” he said.

Records of historic Libor submissions available on Bloomberg show that despite HBOS and RBS being on emergency life support they were both submitting Libor figures that appeared to show they could borrow at cheaper rates in dollars and sterling than Barclays throughout the months leading up to the collapse of Lehman Brothers in September 2008, and in the period afterwards.

The normal way that Libor - and, indeed, lending in general - works is that the weaker a bank is, the more it has to pay to borrow. In the autumn of 2008, that all fell apart: banks which were too weak could offer high rates to borrow at, but those high rates were themselves taken as a sign that the banks were on the brink of collapse.

The result of this is that there was basically no level at which HBOS and RBS could borrow all the money they needed (the technical parlance is that there was no level which "cleared" the market). It would have been impossible for them to submit true estimates of how much they'd have to pay to borrow large sums, because they simply could not borrow that much. To be accurate, Libor would have had to hit infinity per cent.

The Bank of England, and Paul Tucker particularly, must have known this, because even after RBS and Lloyds Banking Group had taken secret funding from the Bank (£60bn of loans to make up for their inability to get money through conventional routes) they continued posting Libor rates lower than Barclays.

This isn't to say that the other banks are necessarily as guilty as Barclays. While we know it is unlikely to be the only bank posting artificially low rates to look safe during the crisis, there is no indication as yet that any other banks were partaking in the far more dubious manipulation, aimed at simple profits, that occurred in the run-up to 2008.

Still, there must be someone at Barclays kicking themselves over the fact that they co-operated with the authorities. The intention was clearly to gain some credit, and possibly lax treatment, for pleading guilty and co-operating from the start. Instead, the bank has become the scapegoat for the crimes of an industry. As Felix Salmon writes:

In any case, when the other shoe drops, the headlines are going to be smaller: this kind of activity is never as shocking the second time around. Look at what happened to Citigroup, which was actually more evil than Goldman when it put together the Class V Funding III CDO. (The profits from Goldman’s Abacus deal went mostly to John Paulson; the profits from the Citi deal went straight to Citi.) Citi settled the case for $285 million — less than Goldman paid — and suffered almost none of the PR backlash that was inflicted on Goldman.

Stephen Hester must be feeling pretty lucky right now. Who wants to bet his name will come up as much as Bob Diamond's?

Stephen Hester, chief executive of RBS, which has been accused of manipulating Libor. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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Theresa May could live to regret not putting Article 50 to a vote sooner

Today's Morning Call.

Theresa May will reveal her plan to Parliament, Downing Street has confirmed. They will seek to amend Labour's motion on Article 50 adding a note of support for the principle of triggering Article 50 by March 2017, in a bid to flush out the diehard Remainers.

Has the PM retreated under heavy fire or pulled off a clever gambit to take the wind out of Labour's sails while keeping her Brexit deal close to her chest? 

Well, as ever, you pays your money and you makes your choice. "May forced to reveal Brexit plan to head off Tory revolt" is the Guardian's splash. "PM caves in on plans for Brexit" is the i's take. "May goes into battle for Brexit" is the Telegraph's, while Ukip's Pravda aka the Express goes for "MPs to vote on EU exit today".

Who's right? Well, it's a bit of both. That the government has only conceded to reveal "a plan" might mean further banalities on a par with the PM's one-liner yesterday that she was seeking a "red white and blue Brexit" ie a special British deal. And they've been aided by a rare error by Labour's new star signing Keir Starmer. Hindsight is 20:20, but if he'd demanded a full-blown white paper the government would be in a trickier spot now. 

But make no mistake: the PM didn't want to be here. It's worth noting that if she had submitted Article 50 to a parliamentary vote at the start of the parliamentary year, when Labour's frontbench was still cobbled together from scotch-tape and Paul Flynn and the only opposition MP seemed to be Nicky Morgan, she'd have passed it by now - or, better still for the Tory party, she'd be in possession of a perfect excuse to reestablish the Conservative majority in the House of Lords. May's caution made her PM while her more reckless colleagues detonated - but she may have cause to regret her caution over the coming months and years.

PANNICK! AT THE SUPREME COURT

David Pannick, Gina Miller's barrister, has told the Supreme Court that it would be "quite extraordinary" if the government's case were upheld, as it would mean ministers could use prerogative powers to reduce a swathe of rights without parliamentary appeal. The case hinges on the question of whether or not triggering Article 50 represents a loss of rights, something only the legislature can do.  Jane Croft has the details in the FT 

SOMETHING OF A GAMBLE

Ministers are contemplating doing a deal with Nicola Sturgeon that would allow her to hold a second independence referendum, but only after Brexit is completed, Lindsay McIntosh reports in the Times. The right to hold a referendum is a reserved power. 

A BURKISH MOVE

Angela Merkel told a cheering crowd at the CDU conference that, where possible, the full-face veil should be banned in Germany. Although the remarks are being widely reported in the British press as a "U-Turn", Merkel has previously said the face veil is incompatible with integration and has called from them to be banned "where possible". In a boost for the Chancellor, Merkel was re-elected as party chairman with 89.5 per cent of the vote. Stefan Wagstyl has the story in the FT.

SOMEWHERE A CLOCK IS TICKING

Michael Barnier, the EU's chief Brexit negotiator, has reminded the United Kingdom that they will have just 15 to 18 months to negotiate the terms of exit when Article 50 is triggered, as the remaining time will be needed for the deal to secure legislative appeal.

LEN'S LAST STAND?

Len McCluskey has quit as general secretary of Unite in order to run for a third term, triggering a power struggle with big consequences for the Labour party. Though he starts as the frontrunner, he is more vulnerable now than he was in 2013. I write on his chances and possible opposition here.

AND NOW FOR SOMETHING COMPLETELY DIFFERENT

Emad asks if One Night Stand provides the most compelling account of sex and relationships in video games yet.

MUST READS

Theresa May is becoming adept at avoiding defeats says George

Liv Constable-Maxwell on what the Supreme Court protesters want

Theresa May risks becoming an accidental Europe wrecker, says Rafael Behr

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Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.