Bank ‘could have prevented Libor scandal in 2008’
US TREASURY secretary Timothy Geithner claims the Bank of England could have prevented the Libor rate-rigging scandal if his recommendations had been taken on board four years ago.
Mr Geithner told US politicians he immediately alerted authorities in the US and UK, offering “detailed recommendations” to the Bank. But he was criticised for not acting sooner and for failing to alert Congress in 2008 that banks could manipulate the Libor interbank lending rate.
Mr Geithner, who was then president of the Federal Reserve Bank of New York, said he “did the important and fully appropriate thing”. He said: We identified a series of specific things that would make it untenable for this rate to be affected by the banks’ incentive to lower their reported cost of funds.
“We gave [the British] very specific detailed changes for doing that. If those had been adopted sooner, you would limit this risk going forward.”
He added that the British Bankers’ Association, which runs the Libor setting process, was not strong enough to oversee Libor.
Barclays was fined £290 million in settlements with US and UK regulators after attempting to manipulate Libor, while chief executive Bob Diamond was forced to resign.
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