Bank Of England Official Was Privy To Libor Manipulation: UK Prosecutors


A senior Bank of England official received emails that were part of an alleged campaign to rig benchmark interest rates, according to prosecutors in the first criminal trial in the Libor scandal. The development marks the latest in a series of embarrassing revelations for the British central bank.

Bank Of England senior official said to receive emails in 2007

According to evidence presented in a London trial Wednesday, Martin Mallet was among a couple of dozen recipients of emails sent in 2007 by brokers allegedly working at the behest of former bank trader Tom Hayes. Mallett was the chief of currencies dealers at the Bank of England at that time. Along with traders at big-name banks, including Barclays, Lloyds and BNP Paribas, prosecutors reportedly told the jury that Mallett was copied on emails that were used to skew Libor.

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They made the claim at Hayes’ trial. He was a dealer in Japanese yen derivatives at Swiss bank UBS and later U.S. firm Citigroup, where the prosecution claims he earned £4.8 million over a four-year period after attempting to rig Libor on an almost daily basis.

Mukul Chawla, the prosecutor trying Hayes, said that in the emails, brokers sent out daily suggestions for where a variety of banks should set Libor. The prosecutor said the emails were used in an attempt to skew interest rates to the benefit of Hayes. It is unclear why Mallett was receiving the emails. There is no indication that he was involved in the alleged Libor manipulation by Hayes and his brokers.

As reported by ValueWalk, Hayes was expected to enter a plea of not guilty, as he faced eight counts of charge in connection with allegedly fixing Libor.

In 2013, Paul Tucker, a Bank of England deputy governor, left the central bank after serving for 33 years. His reputation was marred in 2012 amid the Libor rigging scandal when former Barclays boss Bob Diamond claimed he had told the bank to lower its Libor submissions.

Emails said to be rewritten to suit Hayes

The revelations surrounding Mallet, whose possible involvement in the Libor scandal remains unclear, came on the second day of Hayes’ trial. Prosecutors have identified him as a central player in the scheme.

Chawla, presented evidence highlighting how some emails were rewritten and reissued on certain days to suit Hayes. The trader wanted a financial reward for altering his forecasts, the jury heard.  Chawla said: “What he is doing is … sending out to all of these people his revision. It is not a revision based on anything genuine, it is a revision based on Mr Hayes’ needs … ”

The latest revelation marks the second embarrassment in as many weeks for the Bank of England. Last week, a secret Bank of England study on the impact of the island nation leaving the European Union was leaked apparently by accident ahead of a public referendum on the issue.

It wasn’t until 2012 that regulators in the U.S. and U.K. began seriously investigating the alleged conspiracy. Big banks around the world have paid more than $9 billion in connection with allegations that traders involved in setting the rate intentionally misreported submissions to bolster their bottom lines.

Last week, UBS disclosed that it has agreed to pay over $500 million in fines to U.S. financial regulators for its role in the Libor scandal involving the manipulation of currency markets and benchmark interest rates.

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Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports
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