The Labour party is facing calls to clarify what its senior Ministers knew of the LIBOS rate rigging scandal, which occurred when the party was in power at Westminster.
The calls for full transparency follow mounting anger over revelations that traders in British banks were attempting to manipulate bank exchange rates between 2005 and 2008, in order to boost bonuses and profits.
LIBOR (London Inter Bank Offered Rate) is the rate at which banks in London lend money to each other.
The rigging of global interest rates was intended to boost bank profits and increase bonuses for traders. Analysts have also claimed that house buyers in the UK almost certainly had to pay higher mortgages as a result of the scam.
The rigging scandal began when Gordon Brown was Chancellor. Mr Brown then became UK PM in June 2007. When Mr Brown became Prime Minister, Alistair Darling replaced him as UK Chancellor.
Labour’s current Shadow Chancellor Ed Balls was economic secretary to the Treasury from May 2006.
The calls for full transparency come on the day that it emerges that the Government controlled Royal Bank of Scotland was aware of the scandal last October and sacked several traders as a result.
Early reports suggest that as many as ten RBS traders were dismissed by the bank, of which 84% is owned by the UK Government. RBS is also expected to be fined over its own role in rigging the LIBOR rate.
Barclays Bank has already been ‘fined’ £290 million by the UK authorities and a further penalty of £100 million has been agreed with the US Treasury.
The scandal has led to calls for the resignation of head of Barclays, Bob Diamond after emails were released showing Barclays traders lobbying colleagues in order to rig the LIBOR rates.
Diamond was the head of Barclays Capital, the department responsible for the misdemeanours, at the time the breaches happened between 2005 and 2009. His colleague, Naguib Kheraj, was formerly Global Chief Operating Officer at Barclays Capital prior to Mr Diamond’s appointment as head.
Kheraj was recruited as an advisor to the Financial Services Authority (FSA) in 2008, when Alistair Darling was Chancellor and Gordon Brown PM. The FSA had been handed regulatory powers in 1997 after Brown, in the face of intense lobbying from the banking industry, had removed them from the Bank of England.
Whilst giving a speech to bankers in 2006 Brown said: “I congratulate you… on these remarkable achievements, an era that history will record as the beginning of a new golden age for the City of London.”
This glorious success, Brown added, was achieved through “a deep and abiding belief in open markets” which Brown’s own policies continued to underpin.
Commenting on the emerging facts around LIBOR fixing in the financial system and the breakdown of regulation, SNP Treasury spokesman Stewart Hosie MP said:
“What we need is full transparency from the Labour party and from the Financial Services Authority.
“Alistair Darling was Chancellor, Gordon Brown was both Chancellor and Prime Minister and Ed Balls was economic secretary to the Treasury during the time LIBOR fixing was going on.
“The question is what exactly did Mr Darling, Mr Brown and Mr Balls know and when? And what were the regulators doing over a three-and-a-half year period?
“Were Darling and his colleagues asleep at the wheel or did they know what was going on yet fail to take any action?
“The consequences of LIBOR fixing for the economy are almost endless particularly in the context of a financial crisis, which is why we need transparency and openness more so now than ever.
“For too long Labour has been trying to pretend that the economic crisis had nothing to do with them – but now we know that Mr Brown, Mr Balls and Mr Darling were in charge during the entire period of the scandalous LIBOR fixing.”
The SNP has today made public ten questions relating to Labour’s period in government which, say the nationalists, Labour could answer now in the interests of transparency:
- 1. During the former Chancellor’s discussions with various banks including Barclays and RBS, did the subject of funding rates for RBS arise and did Mr Darling receive a briefing on this subject from officials?
- 2. Did the former Prime Minister or Chancellor ask whether there was oversight of the arrangements around LIBOR given the increasing relevance of liquidity and the obvious self-interest of banks during the financial crisis?
- 3. When was the former Chancellor first informed of the LIBOR fixing allegations and by whom? What was his immediate response?
- 4. Do the former Prime Minister, Chancellor and UK Economic Secretary consider the fixing of LIBOR to have potentially impacted the ability of UK banks to remain solvent during the financial crisis? If so, was this a consideration in their silence on the matter?
- 5. Did they receive official advice on the relevance of transparency around such a serious investigation in the context of wider allegations of malpractice and mismanagement in UK banking?
- 6. Why did the former Chancellor not make a statement to Parliament on these serious allegations as soon as they became known or at least at some point during his tenure in office?
- 7. Does the former Chancellor believe it would have been appropriate in the context of substantial malpractice in the banking sector to at least make Parliament aware of the LIBOR fixing investigation?
- 8. Do the former Prime Minister, Chancellor and Economic Secretary believe it was appropriate for such an important financial rate to be set by the banks without proper supervision particularly in the context of a banking crisis?
- 9. The Economic Secretary is responsible within HMT for banking, finance and financial regulation. Did the former Economic Secretary attend any discussions or briefings with regulators, officials or banking representatives which covered the subject of LIBOR?
- 10. Will Ed Miliband compel the former Labour ministers to give come clean on what they knew and when?