[h=3]By JASON DOUGLAS[/h]LONDON—Bank of England Governor Mervyn King supported proposals put forward by the Federal Reserve Bank of New York in 2008 to change how a key interest rate at the center of a regulatory probe was calculated, correspondence published Friday by the central bank shows.
The emails between Mr. King and Timothy Geithner, now U.S. Treasury Secretary but then president of the New York Fed, may raise awkward questions for central bank officials about how much they knew about alleged rigging of the London interbank offered rate, or Libor, in 2008.
[h=3]Streaming Coverage[/h]
Follow the latest developments in the investigation and fallout over manipulation of interest rates during the financial crisis.
As reported earlier by The Wall Street Journal, Mr. Geithner passed on six recommendations to the BOE about how the calculation of Libor ought to change, including a recommendation aimed at eliminating banks' "incentive to misreport." Libor is published by the British Bankers' Association, which compiles the benchmark rate from quotes submitted by a panel of banks.
The emails show Mr. King told Mr. Geithner he thought the Fed's proposals "sensible" and passed them on to the BBA, which at the time was reviewing how Libor was calculated amid concern it wasn't giving an accurate picture of banks' borrowing costs.
Correspondence also published Friday between Angela Knight, BBA chief executive, and Paul Tucker, currently the BOE's deputy governor for financial stability but then its markets chief, show the BBA planned to include the Fed's views in an overhaul of Libor.
The emails show BOE officials were aware of the Fed's concerns about Libor misreporting. Mr. Tucker, in evidence to U.K. lawmakers investigating the circumstances surrounding Barclays PLC's $450 million settlement for claims its traders tried to manipulate Libor, said officials thought Libor was "dysfunctional" but didn't think banks were dishonestly providing incorrect submissions to the BBA.
In a statement, the BOE said Mr. King discussed Libor-setting with other central bank governors in 2008, prompting the New York Fed's suggestions. The BOE didn't have any regulatory responsibilities in the area of Libor-setting in 2008, the central bank said.
Mr. King is likely to be quizzed by lawmakers on Libor when he appears before parliament's Treasury Select Committee Tuesday.
Other recommendations in the memo from Mr. Geithner included calling for a more "credible reporting structure," that would have established a set of best practices for banks when "calculating and reporting rates." The New York Fed recommended having the BBA require that a bank's internal and external auditors confirm that they were abiding by best practices.
Mr. Geithner also called for broadening the number of U.S. banks that were represented in some of the measurements of Libor.
Additionally, the memo from the New York Fed recommended that the BBA "provide more specific guidance as to the size of the transaction being referenced in the reported quoted rates."
U.S. lawmakers in recent days have stepped up pressure on Mr. Geithner and the New York Fed for details of what they might have known regarding rate fixing in 2007 and 2008 and why more wasn't done to intervene.
— Damian Paletta contributed to this article.
The emails between Mr. King and Timothy Geithner, now U.S. Treasury Secretary but then president of the New York Fed, may raise awkward questions for central bank officials about how much they knew about alleged rigging of the London interbank offered rate, or Libor, in 2008.
[h=3]Streaming Coverage[/h]
Follow the latest developments in the investigation and fallout over manipulation of interest rates during the financial crisis.
As reported earlier by The Wall Street Journal, Mr. Geithner passed on six recommendations to the BOE about how the calculation of Libor ought to change, including a recommendation aimed at eliminating banks' "incentive to misreport." Libor is published by the British Bankers' Association, which compiles the benchmark rate from quotes submitted by a panel of banks.
The emails show Mr. King told Mr. Geithner he thought the Fed's proposals "sensible" and passed them on to the BBA, which at the time was reviewing how Libor was calculated amid concern it wasn't giving an accurate picture of banks' borrowing costs.
Correspondence also published Friday between Angela Knight, BBA chief executive, and Paul Tucker, currently the BOE's deputy governor for financial stability but then its markets chief, show the BBA planned to include the Fed's views in an overhaul of Libor.
The emails show BOE officials were aware of the Fed's concerns about Libor misreporting. Mr. Tucker, in evidence to U.K. lawmakers investigating the circumstances surrounding Barclays PLC's $450 million settlement for claims its traders tried to manipulate Libor, said officials thought Libor was "dysfunctional" but didn't think banks were dishonestly providing incorrect submissions to the BBA.
In a statement, the BOE said Mr. King discussed Libor-setting with other central bank governors in 2008, prompting the New York Fed's suggestions. The BOE didn't have any regulatory responsibilities in the area of Libor-setting in 2008, the central bank said.
Mr. King is likely to be quizzed by lawmakers on Libor when he appears before parliament's Treasury Select Committee Tuesday.
Other recommendations in the memo from Mr. Geithner included calling for a more "credible reporting structure," that would have established a set of best practices for banks when "calculating and reporting rates." The New York Fed recommended having the BBA require that a bank's internal and external auditors confirm that they were abiding by best practices.
Mr. Geithner also called for broadening the number of U.S. banks that were represented in some of the measurements of Libor.
Additionally, the memo from the New York Fed recommended that the BBA "provide more specific guidance as to the size of the transaction being referenced in the reported quoted rates."
U.S. lawmakers in recent days have stepped up pressure on Mr. Geithner and the New York Fed for details of what they might have known regarding rate fixing in 2007 and 2008 and why more wasn't done to intervene.
— Damian Paletta contributed to this article.