Tuesday, 27 November 2012

Libor Scandal Scuppers Tucker BOE Bid as Carney Takes Top Post

Libor Scandal Scuppers Tucker BOE Bid as Carney Takes Top Post

Updated 11:28 p.m., Monday, November 26, 2012

(Bloomberg) -- Paul Tucker, whose three-decade career at the Bank of England marked him out as the leading candidate to become the next governor, failed to secure the top post after the Libor scandal undermined his bid.
Tucker was last week described as “home and dry” by bookmaker William Hill Plc, which made him the favorite for the job at odds of 1-4, meaning a 4-pound ($6.40) wager would return a 1-pound profit. Instead, Chancellor of the Exchequer George Osborne named Bank of Canada Governor Mark Carney yesterday as Mervyn King’s replacement.
Tucker’s chances were tainted after he was forced to deny accusations from lawmakers that he pressed Barclays Plc to lower Libor submissions, and defend himself against criticism he ignored warnings from other regulators on flaws in the rate. Tucker, the BOE deputy governor for financial stability, said he “warmly” congratulated Carney. Osborne said he hopes Tucker will continue at the central bank.
“He’s obviously going to be gutted,” said Amit Kara, an economist at UBS AG in London and a former Bank of England official. “Perhaps the government fears that other gremlins like the Libor scandal may emerge. There’s no question he’s extremely competent, and it would be a shame for the bank to lose him if he were to resign.”

London Undermined

Barclays Plc lost its three most senior executives and incurred a record 290 million-pound fine in June for manipulating the London interbank offered rate, the benchmark for more than $300 trillion of securities. Now, more than a dozen banks worldwide, including Royal Bank of Scotland Group Plc, Britain’s biggest publicly owned bank, are being probed over allegations they submitted artificially low Libor rates to appear healthier than they were or that traders at the firms sought to fix the rate to profit from derivatives bets.
Tucker, 54, said in July during testimony to lawmakers that the Libor investigation had uncovered a “cesspit” in the City of London, Europe’s largest financial center. London’s light- touch regulatory regime has also been damaged this year by JPMorgan Chase & Co.’s $6.2 billion trading loss as well as Kweku Adoboli’s $2.3 billion of unauthorized trading at UBS AG.
Tucker joined the bank in 1980 after studying mathematics at Cambridge University, and worked his way up to become markets director in 2002.
In that division, he initiated practices such as monthly meetings where staff reported on developments in global capital markets, and developed relationships with chief risk officers at financial institutions to improve the BOE’s access to market information, said Simon Wells, who worked for Tucker and became U.K. economist at HSBC Holdings Plc at the end of last year.

‘Oxymoron’

“Before his arrival, the bank’s market intelligence function was something of an oxymoron, and he turned it into something that really surveyed modern capital markets,” Wells said. In the race for governor, “what set him aside from some of the other candidates was a keen interest in and understanding of financial markets.”
His work in the markets department drew him into the Libor scandal. Libor is calculated by a daily poll carried out on behalf of the British Bankers’ Association that asks firms to estimate how much it would cost to borrow from each other for different periods and in different currencies. The top and bottom quartiles of quotes are excluded, and those left are averaged and published for individual currencies before noon in London. Because the rate is based on estimates rather than actual traders, it’s open to manipulation.

Lowballing Submissions


Read more: http://www.sfgate.com/business/bloomberg/article/Libor-Scandal-Scuppers-Tucker-BOE-Bid-as-Carney-4068296.php#ixzz2DQLjTJGN

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