The alarm on the manipulation of the London interbank rate was triggered in 2008, when at a meeting the BBA (British Bankers Association, represents the banking institutions and manages the Libor) warned the Bank Of England that the Libor had become too big for the organization.
In recent months, the British authorities have accused the BBA of not having protected the Libor as it was supposed to.
The former CEO of the British Bank Association, Angela Knight, wanted to propose moving the protection of Libor from private individuals to the authorities, but her proposal fell on deaf ears.
They appear to be saying in Tuesday's Wall Street Journal that the Bank of England was unwilling to act.
In November 2007, at a meeting of the BoE, some of its executives were concerned that the Libor rate was too low, which could have masked the real financial problems of some institutions.
A few days before the BBA meeting in April 2008, rumors arose of possible manipulations of the Libor.
Angela Knight, former CEO of the BBA consulted then Fed Chairman and now US Treasury Secretary, Timothy Geithner, who gave her advice on how to improve the management of the British interbank rate. Knight then asked the Bank of England to also propose some solution, but the English bank refused.
Meanwhile, discussions arose in the British Bank Association between those who wanted to radically reform the management of the rate and those who wanted to leave it as it was.
A spokesman for the BBA said on Tuesday: “Since the inception of the Libor, the BBA has always worked to safeguard and protect the integrity of the rate, also by interacting with international authorities. There has always been a clear unity of views among all bank representatives within the BBA”.
This stalemate continued until June, when Barclays was the first bank to admit that it had manipulated the Libor and later the Euribor as well, and later, in bargaining with the British and American authorities, it paid a fine of £290 million. The scandal, which has now become public, has pushed the entire Braclays top management to resign.
About 13 banks and many of their traders are currently being investigated.
