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Mon, 9th Jul 2012 18:46

LONDON, July 9 (Reuters) - Paul Tucker, deputy governor of the Bank of England, faced a grilling by British lawmakers on Monday as part of a probe into the Libor interest rate rigging scandal at Barclays.

Following are comments from Tucker from the hearing in parliament's Treasury Select Committee:



WAS DIAMOND RIGHT TO RESIGN?

'There was great concern that trust has to be re-established in banking.

'I would have wanted the regulators and the Bank to make clear to the Barclays board that as the institution that was in the spotlight and found responsible for the terrible practice that they needed to take decisive action to start the process of cleaning it up.

'The events of the last two weeks show that absolutely decisive action was needed to start a new chapter. What has been revealed has come as a deep shock.'



ON CONCERNS ABOUT BARCLAYS' FUNDING IN OCT 2008

'We were not in the position of thinking Barclays was doomed. Had we thought that, we the Bank would have given very strong advice to the government that it wasn't safe for Barclays not to take capital from the government, but it was a hard call and there was anxiety.

'This wasn't a call for me to get to the bottom of something. It wasn't a call about analysing what's going on in the market. The purpose of the call (was to say) 'people in the market are talking about you, they're talking to everybody about you, including people in Whitehall. There's concern about you. Just make sure that the day-to-day funding operations of your bank don't tip you over the cliff'.'



ON WHETHER HE WAS AWARE OF LIBOR MANIPULATION

'We were not aware of it, other than what is starting to come out in these investigations. We didn't have any knowledge, I didn't have any knowledge.

'This was a cesspit.'



ON WHETHER HE SAW EVIDENCE OF FALSE LIBOR SUBMISSIONS

'I didn't see any evidence of lowballing at the time.

'We thought it was a malfunctioning market not a dishonest market.'



ON MARKET CONDITIONS IN LATE 2008

'We were throughout this period focused on how to get through December into January ... we were also very worried that further mortgage banks might fail and run out of money.'



ON WHETHER HE RECORDED OCT 2008 CONVERSATION WITH BOB DIAMOND

'The conversation with Bob Diamond was not a conversation I made a note of. Sitting here I greatly wish I had taken a note of it.'



DID JEREMY HEYWOOD OR ANYONE LEAN ON YOU TO ASK BARCLAYS TO LOWER LIBOR RATES?

'Absolutely not.'



ON WHETHER HE COULD HAVE BEEN MISINTERPRETED

'It was not remotely in my mind during this conversation that I could be misinterpreted by Bob Diamond on anybody else.'



ON WHETHER IT WAS WRONG FOR BARCLAYS TO MISINTERPRET HIS COMMENTS

'I think it was. As I understand he didn't intend to take it that way ... I don't think Bob Diamond did misunderstand. The reason for mentioning Whitehall is everyone was talking about this now. The market must be talking to Whitehall.'



ON MOTIVATION FOR TALKING TO BOB DIAMOND:

'This isn't about Libor. It's about the conduct of their Treasury desk in the money markets apparently paying higher rates of interest. Money markets desks can send out distress flags.'



ON WHETHER HE KNEW OF SUSPICIONS OF LIBOR RIGGING THE YEAR BEFORE

'We were not aware of allegations of dishonesty. I was not aware of that. I think that what was being said we understood to mean 'these money markets are not working, they are dysfunctional'.'



ON CONCERNS ABOUT HIGH BARCLAYS' FUNDING COST

'I mailed him (Diamond) earlier about that to say you've used the CGS (credit guarantee scheme), you've paid 140 basis points over gilts... That's a lot. That struck me as quite a lot.'



ON STATE OF LIBOR MARKETS AT THAT TIME

'Markets had dried up. For months there had been periods where sometimes it would be based on judgments of where they would be able to borrow rather than transactions.'



ON BANKING REFORM AND BANKERS' PAY

'We've got to get to the point where Treasury departments are not profit centres. I don't think bankers should wait for findings from regulators or this committee they should get on and do it.

'Extending the scope of criminal sanctions is important. Something else that needs to be looked at is incentives.

'There is an issue of the structure and pay for more junior people on the desks as well. It has been too easy to get rich quick.

'The split between retail banking and commercial banking needs to proceed.'



ON WHETHER DIAMOND WAS WHISTLEBLOWING ON BAD LIBOR SUBMISSIONS

'I did not understand this conversation in any way as Mr Diamond telling me in any way about dishonesty or cheating.'



ARE YOU RESPONSIBLE FOR THE EFFECTIVENESS OF LIBOR?

'We didn't see ourselves as being responsible for its effectiveness whatsoever. We used it as an indicator of the things that I have described. We didn't take any responsibility for Libor, we were not a regulatory body.'



ON WHETHER BANKS COLLUDED IN FIXING LIBOR

'Such collusion would never have occurred to me until the revelations of the last few weeks.'



ON CONCERNS OVER LIBOR

'We were worried about the credibility of Libor as a piece of global financial infrastructure in the spring of 2008.'



(Compiled by Reuters correspondents) Keywords: BANKING LIBOR/TUCKER

(steve.slater@thomsonreuters.com)(+44)(0)(20 7542 4367 and follow me on twitter @reuterssteves)

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