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LONDON, July 17 (Reuters) - Bank of England governor Mervyn King faced questions from parliament's Treasury Select Committee on Tuesday.

Also in the hearing, officially scheduled to discuss the BoE's Financial Stability Report and measures to get credit flowing through the ailing economy, were BoE deputy Paul Tucker, FSA chairman Adair Turner, and BoE director Paul Fisher.

Following are comments from the hearing:



KING ON BENCHMARK RATE AND LEGAL CONTRACTS

'You can get periods when it's simply impossible to use a market reference rate and those writing legal contracts need to take that into account and have some other method of creating a reference benchmark rate when the markets don't permit you to do it.'



KING ON LIBOR TALKS IN BASEL

'A number of us in the central banking world talked about what was the right long-term reform and I'm confident we should have to return to it.

'When I meet with my central bank colleagues in September in Basel...I will put on the agenda the discussion of the future arrangements of this sort of benchmark.'



FPC MEMBER DONALD KOHN ON BANKS' SHORT-TERMISM

'We've seen some horrendous behaviour over recent years in which the desire for short-term profits has overcome the longer-term good that the banks can play in society.'



KING ON LIBOR SUBMISSIONS

'There is a world of difference between people saying they do not know how to submit when they are doing Libor submissions because the market is dysfunctional and no one knew what to make of the quotes that were being submitted.

'There is world of difference between that situation and deliberate mis-representation of the submissions with a view to a financial gain either private or institutional.

'We had no evidence of wrongdoing (in that respect), none was supplied to us and the evidence that you cite here, there were plenty of academic articles that looked into it and said we cannot see in the data any evidence of manipulation.

'And I say again, if you go back to the inquiries which regulators made, it took them three years to work out and find the evidence of wrongdoings.

'If it was so obvious and it was all in the newspapers and everyone was talking about it, one might ask the question why everyone didn't say this is wrong. The reason was because it wasn't wrongdoing, it was in a market that was dysfunctional and not operating in any effective way.'



FISHER ON QE EXIT

'I think we have a considerable amount of preparation for QE (quantitative easing) exit, we can't really do any more until we know the circumstances of the time.

'The preparations we did went back to 2010 when we had discussions with the Debt Management Office about a range of options we would have for exiting QE.

'We came up with some plans, those plans depend in part on how quickly we need to unwind QE, so you can't be definitive about it.

'We need to think of it again, because it's a couple of years since we drew up the initial plans. It doesn't look like we'll be exiting any time soon.'



KING ON LACK OF SUPPORT FOR REGULATORS

'To be a regulator before 2007 was to have no support from anybody, dare I say it, even in parliament.

'The consensus was anything the regulator did was to impede the working world of ... the financial services industry and everyone said that. I'm not trying to pin it on any individual. The regulators had a very tough job.'



KING ON BARCLAYS' FUTURE

'Now Barclays, which is a great bank, has to look forward, has to create a new bank with a new culture to take it forward.'



KING ON BBA'S ROLE

'The BBA had to be nudged to get into the right direction, but once they had been nudged...they did work very hard to make a successful consultation.'



KING ON BARCLAYS BOARD

'It is possible to sail close to the wind once, you can sail close to the wind twice, maybe even three times, but when it gets to four or five times it becomes a regular pattern of behaviour, you do have to ask questions about the navigational skills of the captain on the bridge and that's what Lord Turner and Andrew Bailey made very clear to the board.

'It seemed to me that the result that the chairman had resigned meant that the board had not fully understood the nature of the concerns and I thought it would be helpful to play a role in making sure they did understand.'



KING ON LEARNING ABOUT LIBOR WRONGDOING

'The first time we knew of alleged wrongdoing is when the reports came out two weeks ago.

'We'd been through all our records and there was no evidence of wrongdoing or reporting the wrongdoing for the banks.'



KING ON FED SHARING LIBOR EVIDENCE

'Well, that (evidence from the Fed on Libor) was never shared with us. I never saw that. And I don't think there's any reason why it should have been shared with us. If they had had regulatory concerns they would have shared it with the regulators.

'At no stage did he or anyone in the New York Fed raise any concerns with the bank that they had actually seen or had evidence of wrongdoing.'



TUCKER ON LIBOR TALKS WITH DUDLEY

'In my discussion with Bill Dudley, of the New York Fed, it wasn't framed in that way (mis-reporting of Libor) it was framed as eroding confidence and credibility, in particular in dollar Libor, that it was being set lower...in London than it was subsequently trading in New York. It didn't set off dishonesty alarm bells.'



KING ON BBA MEETINGS

'The bank and the FSA went to various meetings with the BBA.'



KING ON GEITHNER

'Well, I solicited it. That's the first part of it because I had spoken to Tim Geithner in Basel, a few weeks before, after that I think was on May 19.

'His deputy Bill Dudley telephoned Paul Tucker and said to him Tim Geithner wanted some advice on how he could feed his views to the EBA, who were responsible for Libor. Should he write to BBA, should he write to me, copied to BBA, whatever.

'And I sent a message back to Paul saying write to me, we'll look at your letter, if we agree with it, we'll endorse it and send it on to the BBA.

'So we solicited that email, it came in, it arrived late one evening when I was in Frankfurt, I sent a message back saying what they should (do).'



TYRIE ON GOVERNANCE OF BANK

'We do need urgently some governance put in place both in the FSA and the Bank (of England) to offer some protection against arbitrary meetings of this type taking place... This has revealed yet another gaping hole in governance of the Bank.'



KING ON CONVERSATION WITH AGIUS AND DIAMOND

'I would like you to make clear to the board that the regulators have expressed these concerns and that the board as a whole needs to know that they are very concerned and have lost confidence in the executive management.'



KING ON HEARING OF AGIUS' RESIGNATION

'On the Sunday late afternoon, early evening I discovered that the (Barclays) chairman had resigned.

'I, first of all, wanted to find out whether either Lord Turner or indeed the Chancellor had been involved in discussions that led up to that and I discovered that all three of us in fact had learned from the BBC website of the resignation of the chairman, which I found rather odd.'



KING ON NEW REGULATORY SYSTEM

'I spoke to our chief legal advisor to find out very carefully what I could and could not say. The world has changed, we will now be the regulator.

'What has changed is that in the past 18 months, the regulatory part of the FSA has worked very closely with me and others in the bank, to move towards to a new regulatory fram

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