Darling denies knowledge of LIBOR scandal but admits Labour sought to lower rates


By Martin Kelly
Labour MP Alistair Darling, who was Chancellor of the Exchequer at the time the LIBOR rate rigging scandal was taking place, has denied any knowledge of wrongdoing.
Interviewed on Channel 4 News, the former Treasury head said he had no knowledge of phone calls between the Bank of England and Barclays and denied having instructed anyone to suggest that Barclays LIBOR rates were too high.

However in a startling admission, the former Chancellor admitted that the last Labour Government had sought to lower the rates through what he described as changes in policy.

Mr Darling’s appearance was the first since the scandal came to light and followed repeated calls for Labour Ministers to explain what they knew about the scandal.

Asked about the internal memo released yesterday by Barclays, that referred to calls implying senior Whitehall officials were keen to see Barclays lower their rate, and whether he had instigated the process, Mr Darling said: “No, certainly not”.

The former Chancellor said there was no evidence that other Ministers or junior Ministers had urged the Bank of England Deputy Paul Tucker to make the calls.

Mr Darling said he wanted Mr Tucker, who made the calls to Barclays former head Bob Diamond who is scheduled to appear before MPs tmorrow, to appear before the same Committee of MPs as soon as possible.

“What Bob Diamond, or Barclays, appear to be saying is that the bank told them to do this.” said the Labour MP, who added:

“I would find it absolutely astonishing that the bank would ever make such a suggestion, and equally I can think of no circumstances that anyone, certainly in a department which I was responsible for – the Treasury – would ever suggest wrongdoing like this.”

Challenged that when Chancellor, Mr Darling knew that LIBOR was a fudge and unreliable, the Labour MP conceded there had been “concern in just about every part of the world” about the way the rate was set.

The former Chancellor’s acknowledgment that there were concerns raised about LIBOR is almost certainly a reference to revelations this week that the UK regulatory bodies were warned five times, starting in 2007, that there were problems the way the rate was set.

Mr Darling also admitted that the Labour Government were interested in the rate in 2008 and indeed had sought to bring the rate down.  However he insisted that the method used had been appropriate and acceptable.

“The way to get it down though was the way we did get it down, which was the Credit Guarantee Scheme, the Special Liquidity Scheme – in other words policy was changed in order to get that rate down.”

Mr Darling said he accepted responsibility for his time as Chancellor, but refused to issue an apology for the banking chaos that has ensued.

Pressure has been building on the former Chancellor to respond to the growing scandal and there have been calls for former Labour Ministers to appear before a full public inquiry.

Responding to the new claims that “senior” Whitehall sources put pressure on Barclays to artificially lower lending rates via the Bank of England,  the SNP’s Treasury Spokesperson Stewart Hosie MP said all Labour Ministers in office at the time must provide details of exactly what they knew and when, about LIBOR interest rate fixing.

The email claims Deputy Governor of the Bank of England, Paul Tucker “stated the levels of calls he was receiving from Whitehall were senior.”

Mr Hosie, a member of the Treasury Select Committee said the email raised yet more questions about the role of senior figures in the former Labour Government.

Mr Hosie said:

“Questions will rightly be put to the former Barclays Chairman Bob Diamond during the Treasury Select Committee evidence session to get further information on who was involved in these calls – but it’s crucial that Labour Ministers in office at the time must also answer for their actions. 

“The interest rate fixing scandal has further undermined public trust in the banking sector.  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 worst period of regulation in the history of the UK financial system.

“The buck stops with Ministers and they must account for their actions in public.

“This demonstrates the need for a full and transparent investigation leaving no stone unturned. The SNP’s preference is for a judge-led inquiry which would ensure all the right questions were asked of the banks, the regulators and the Ministers to whom they reported.”

The SNP has published a list of ten questions they say former labour Ministers need to answer:

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?