Central banks launch joint investigation into Libor scandal

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Mervyn King, the governor of the Bank of England and chair of the Economic Consultative Committee (ECC), yesterday announced a group of senior officials would look into the issues surrounding reference rates used in financial markets.

The decision to discuss the Libor had been made weeks before, in the wake of the rate-rigging scandal. King followed through with a promise to raise the matter with the ECC, an informal group that supports the Global Economy Meeting (GEM).

Following the meeting on September 9, King said the group would examine the issues facing the use of reference rates in financial markets. He said consultation with the market would also be a part of the investigation in order to "provide input into the wider official debate co-ordinated by the Financial Stability Board".

Earlier this year, the Bank of England found itself drawn into the rate-setting scandal after Barclays was heavily fined for rigging the Libor rate. It emerged that Bob Diamond, then chief executive at Barclays, had sent an email to colleagues during the crisis in which he impliedthat  Paul Tucker, a deputy governor at the Bank of England, had given an instruction to bring Libor down. The central bank denied any wrong-doing.

In August, the initial thoughts of a review panel led by Martin Wheatley, chief executive-designate of the UK's new Financial Conduct Authority, were released. King said the rest of the conclusions were eagerly awaited.

"The BIS governors look forward with great interest to the recommendations of the Wheatley Libor review, and to the reports of other official groups examining reference rates used in financial markets," he said.

The ECC includes all the Bank for International Settlements (BIS) board member governors, the central bank governors from India and Brazil and the BIS general manager, Jaime Caruana.

The ECC assembles proposals for consideration by the GEM, which comprises the governors from 30 BIS member central banks in major advanced and emerging market economies that account for about four fifths of global GDP.

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