Report: Regulators covered up efforts by central banks to rig interest rates

Regulators on both sides of the Atlantic covered up efforts by government and central banks to get lenders to cut financial crisis-era benchmark interest rates, leaving individual traders to take the fall, according to a joint BBC-Times of London report released Monday.

More than a dozen bankers, including at least two whistleblowers, were jailed for rigging interest rates but documentary evidence that lenders cut the rates at which they lent to other banks under pressure from at least six central banks was never heard in court, the report states.

The report alleges that the Bank of England, Banque de France, European Central Bank, Banca d'Italia, Banco de Espana and the Federal Reserve Bank of New York interfered with the London and Euro Interbank Offered Rates, or Libor and Euriobor, benchmarks on a grand scale as the financial crisis deepened in the fall of 2008.

With lending grinding to a halt, central banks in the West worked together to push down the rates at which banks lend to each other because of their impact on the cost of credit globally and the perceived credit worthiness of too-big-to-fail-banks. Agencies including the FBI and Britain's Financial Conduct Authorities were allegedly informed about the manipulation by a Barclays Bank whistleblower as far back as 2010 but kept it from Congress and Parliament.

Speaking in Parliament on Friday, Conservative MP David Davis urged lawmakers to back a probe into the covering up of "state involvement in Libor rigging, and the scapegoating of 37 low and middle-ranking bankers, some of whom spent years in jail.

"I am also greatly concerned that the Treasury Select Committee may have been misled by state agencies about the knowledge and involvement of the state in setting false rates," Davis said.

The committee chairman also said Parliament had been misled because the new evidence showed information had been withheld from the panel's 2012 probe into Libor.

Regulators have pushed back against the allegations asserting compliance with disclosure rules or refused to comment while the Bank of England said the suggestion it had sought to withhold information from criminal proceedings was "entirely false."

"What was known about inappropriate Libor submissions was thoroughly looked into a decade ago," the Financial Conduct Authority told the Times. "Full disclosure of evidence was provided as part of criminal prosecutions."

The European Central Bank said it "strongly rebuts" the assertions that "misrepresent the role of a central bank in implementing monetary policy."

"The ECB has always acted in line with its mandate and in full compliance with the law."

In 2018, Citibank paid out $100 million to settle a Libor rigging suit by 42 states becoming the third bank to settle with state attorneys general for illegally manipulating the benchmark interest rate after Barclays and Deutsche Bank, which were fined $420 million collectively.