No hint of LIBOR fraud in 2008: King

The governor of the Bank of England says US authorities did not show him any evidence of manipulation of a key market rate when they raised concerns in 2008.

Mervyn King told a House of Commons committee on Tuesday that during the 2008 financial crisis, there was widespread concern about what the London interbank offered rate, or LIBOR, was indicating about the state of banks.

However, there were no fears being voiced about misreporting.

UK lender Barclays has since been fined $US453 million ($A443.57 million) by US and UK financial authorities for manipulating the LIBOR between 2005 and 2009.

Barclays chief executive Bob Diamond have resigned as a result of the scandal and chairman Marcus Agius says he will go once his successor is chosen.

Treasury Select Committee member Michael Fallon pressed King on why Timothy Geithner, then president of the New York Federal Reserve, in 2008 proposed "procedures designed to prevent accidental or deliberate misreporting" and "eliminate incentive to misreport".

"When you design any self-reporting scheme you have rules to prevent misreporting," King said.

"That isn't the same as saying you've got evidence that there is misreporting, nor did the Fed or anyone else send us any evidence of misreporting."

LIBOR is an average rate set by banks each morning that measures how much they expect to pay each other for loans. The rate is also used in calculating borrowing costs of hundreds of trillions of dollars in loans and investments such as bonds, auto loans and derivatives. The process is supervised by the British Bankers Association.

At the height of the 2008 credit crisis, following the collapse of Lehman Brothers, interbank borrowing dried up as fear and speculation over which lender would be the next to fail gripped the markets lenders.

In sometimes testy exchanges with the committee, King said the first he knew of any alleged wrongdoing during 2008 "was when the reports came out two weeks ago".

Those reports by the US Department of Justice, the Commodity Futures Trading Commission and Britain's Financial Services Authority detailed rate manipulation by Barclays between 2005 and 2009.

"We have been through all our records. There is no evidence of wrongdoing or reporting of wrongdoing to the Bank (of England)," King said.

"I discussed this with your committee in 2008. Everyone was concerned about what LIBOR meant at that stage. Your committee discussed it, we discussed it, the press discussed it. That is a million miles away from saying that is the same as deliberate, deceitful manipulation of submissions in order to make financial gain," King added.

An analysis published by the NY Fed in May 2008 noted that although banks "may have incentives to misreport in order to manipulate the level of the LIBOR fixing, and thereby influence their funding or derivative positions, this is not the primary driver of recent alleged misquotes."

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