May 28, 2023

Data Points: What the Nation Got for $800 Billion

This raises an intriguing question: What did the United States get for all that money?

Like previous rounds of quantitative easing, the goals for QE3 included reducing long-term rates, in that way bolstering lending, housing and employment. Those are big tasks, especially with Congress cutting spending. And there have been improvements, both during earlier rounds and during QE3. Since September, housing and employment have strengthened somewhat, and long-term rates fell for a while. Now, though, rates are actually higher than when QE3 began.

“Data are quite mixed on whether we’ve seen an expansion of lending,” said Catherine L. Mann, Rosenberg professor of global finance at Brandeis. Lending has increased for cars and commercial property, she says, but not for small business. New mortgage origination for housing remains weak. Meanwhile, the Fed’s outsize presence in the markets for Treasuries and mortgage-backed securities may have changed those markets in ways no one can predict.

QE3 was intended to make riskier assets like stocks more appealing. And stocks, which are predominantly owned by the wealthy, have risen in price. As a Bank of England study has shown, quantitative easing disproportionately benefits those who are already well off.

The Fed had other options. It could have put cash directly into the hands of consumers who needed it. Under the Federal Reserve Act, it can print and lend any amount of money for any length of time to any person or entity, as long as it is satisfied that it is likely to be repaid. With $800 billion, for example, the Fed could have given every homeowner in the country a $10,000 loan at a near-zero rate of interest. Think of what that might have done for the economy.

Source: Federal Reserve

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Central Bank Signals Slight Optimism for Europe, but Interest Rates Stay Low

“We are seeing possibly the first signs this significant improvement in confidence and interest rates is finding its way to the economy,” Mr. Draghi said at a news conference after the bank’s decision to leave its benchmark interest rate unchanged at a record low of 0.5 percent.

The still fragile state of the euro zone economy means that any decision to raise interest rates is still a long way off, Mr. Draghi indicated. Policy makers expect “the key E.C.B. interest rates to remain at present or lower levels for an extended period of time,” Mr. Draghi said, repeating a pledge he first made a month earlier.

In London on Thursday, Britain’s central bank, the Bank of England, also decided to hold interest rates steady.

The Bank of England held its interest rate at 0.5 percent, also a record low, and made no change to its program of economic stimulus, leaving the target at £375 billion, or about $570 billion. In Britain, which does not use the euro, the government reported last week that the economy grew 0.6 percent in the second quarter from the previous quarter and that all main industries were reporting faster growth for the first time in three years.

For Mr. Draghi, it has been about a year since he defused fears of a euro zone breakup by promising to do “whatever it takes” to keep the common currency together. That expression of resolve helped check the euro zone’s decline, but was not enough to push the region into growth again.

Asked to take stock of the state of the euro zone today, Mr. Draghi listed numerous improvements, including stronger exports from countries like Spain and Italy; lower market interest rates for government bonds; and progress by political leaders in reducing their deficits and improving economic performance. “The picture seems to be better from all angles than it was a year ago,” he said.

But he took a more cautious view than many analysts of recent surveys of business sentiment, which have raised hopes that the euro zone economy could be emerging from recession. The surveys “tentatively confirm the expectation of a stabilization of economic activity at low levels,” Mr. Draghi said.

At least one analyst detected a nuanced shift in Mr. Draghi’s assessment.

“If there was any change at all, his description of economic prospects sounded slightly more optimistic,” Jörg Krämer, chief economist at Commerzbank in Frankfurt, said in a note to clients.

“Slightly” is the crucial word. Credit for businesses remains scarce, Mr. Draghi noted, and the labor market is weak. Unemployment in the euro zone was stuck at a record high of 12.1 percent in June, according to official data published Wednesday, though there was an infinitesimal decline in the total number of jobless people: 24,000 fewer people were out of work in May out of a total of 19 million.

Even if the euro zone economy does emerge from recession soon, economists say, growth will be weak and it will take years before joblessness in countries like Spain — where more than a quarter of the work force is unemployed — returns to tolerable levels.

With interest rates already at record lows, Mr. Draghi has in recent months been trying to use his powers of persuasion to talk down market rates and make credit more available to businesses and consumers. Last month, he broke with precedent by promising to keep rates low for an extended period. Before then, the central bank refused to offer so-called forward guidance.

On Thursday, Mr. Draghi contested comments by some analysts that his forward guidance has not had much effect. It was successful in calming financial markets, he said, and partly successful in pushing down short-term market interest rates.

He left open the possibility that interest rates could fall further, but refused to say whether members of the bank’s Governing Council discussed a rate cut when they met on Thursday.

The job of the European Central Bank has been complicated recently by signs that the United States Federal Reserve could begin to gradually roll back its economic stimulus. On Wednesday, the Fed indicated it would continue its bond-buying program for at least another month.

Expectations of an eventually tighter United States monetary policy have unsettled financial markets in Europe, prompting Mr. Draghi to reassure investors that the European bank was a long way from going in the same direction.

Julia Werdigier contributed reporting from London.

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Central Banks of Europe and England Pledge to Keep Rates Low for a While

The bid to reassure investors brought the two central banks into closer alignment with the Federal Reserve, which, under Chairman Ben S. Bernanke, has adopted a policy of becoming more open about its intentions.

At the same time, they appeared eager to signal that they would not follow the Fed in preparing for a gradual withdrawal of economic stimulus.

Mario Draghi, the president of the European Central Bank, said at a news conference that crucial interest rates would “remain at present or lower levels for an extended period of time.” Until Thursday, the central bank had steadfastly refused to pin itself down on future policy.

“It’s not six months,” Mr. Draghi said. “It’s not 12 months. It’s an extended period of time.”

Mr. Draghi also said that the central bank was signaling a “downward bias” in interest rate policy, meaning further cuts were possible or even likely.

Only hours earlier, Mark J. Carney, who became governor of the Bank of England on Monday, made a similar break with tradition. The British central bank said in a statement that any expectations that interest rates would rise soon from their current record low level were misguided.

With their promises of easy money stretching toward the horizon, the central bankers offered more certainty to investors at a time when tensions in Europe are rising again. So-called forward guidance is considered one of the tools available to central banks, but it was one the European Central Bank and the Bank of England had not used before.

European markets reacted positively to the announcements, with the FTSE 100 in London closing 3.1 percent higher and the Euro Stoxx 50, a benchmark of euro zone blue chips, climbing 3 percent. (Markets in the United States were closed for the Fourth of July holiday.) The euro fell sharply, a development that was probably not unwelcome at the European Central Bank, since a cheaper euro makes European products less expensive in foreign markets, feeding exports. The British pound also fell.

Mr. Draghi said it was a coincidence that his central bank and Bank of England introduced forward guidance on the same day. Both left their main interest rates at 0.5 percent and did not announce any other policy moves. It was a day for talk rather than action.

“Mr. Draghi did what he does best today: intervene verbally to great effect,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said in a note.

Mr. Draghi’s statement on Thursday came almost a year after he defused the euro zone debt crisis with a promise to do “whatever it takes” to preserve the currency union.

But after months of relative calm, Europe has been rattled in recent days by a political crisis in Portugal, which has raised questions about whether the region’s governments will be able to withstand popular discontent with their policies of cutting budgets to bring public debt under control. Investors have responded by pushing up the risk premium they demand on bonds issued by Italy, Spain and other troubled euro zone countries. Market rates on Italian and Spanish bonds retreated on Thursday after Mr. Draghi’s comments.

The commitment to keep rates low helps amplify the effect of rates that are already nearly rock bottom, by reassuring investors that they can count on easy money for the foreseeable future.

But some analysts saw Mr. Draghi’s statement as a bluff — a tacit admission that the central bank has run out of other ways to stimulate the euro zone economy.

“A change of a few words in the way he phrases the E.C.B.’s policy stance is an insufficient policy response to alter the — very troubled — course of the euroland economy,” Carl B. Weinberg, chief economist at High Frequency Economics in Valhalla, N.Y., said in an e-mail.

Jack Ewing reported from Frankfurt, and Julia Werdigier from London.

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DealBook: Bank of England Official to Leave

Paul Tucker, deputy governor of the Bank of England.Neil Hall/ReutersPaul Tucker, deputy governor of the Bank of England.

LONDON – The Bank of England said Friday that Paul Tucker would resign as deputy governor. The announcement comes two weeks before Mark Carney takes over as the governor of the central bank.

Mr. Tucker, who has spent 33 years at the Bank of England, was also a candidate for the top job at the central bank. Mr. Tucker said that he planned to stay through the summer to help Mr. Carney, the former governor of the Bank of Canada, settle in to his new role.

“It has been an extraordinary honor to serve at the Bank of England over the past 30 years,” Mr. Tucker said in a statement. “I am very proud that, through the bank and the wider central banking community, I have been able to make a contribution to monetary and financial stability. I am looking forward to supporting Mark Carney as he arrives at the bank.”

Mr. Tucker had been a leading candidate to replace Mervyn A. King as governor of the Bank of England. But his chances dimmed after questions arose after an interest rate manipulation scandal erupted last summer.

British politicians accused Mr. Tucker and the central bank of failing to crack down on efforts by Barclays and other banks to manipulate the London interbank offered rate, or Libor, a benchmark for mortgages, corporate loans and other financial products worldwide. Mr. Tucker had to defend himself against assertions by former Barclays executives that the Bank of England had been aware of attempts to influence rates.

Mr. Tucker joined the Bank of England in 1980 after studying mathematics at Cambridge University. He became executive director for markets in 2002 and a member of the Bank of England’s rate setting committee. Earlier this year, he took a seat at the newly created Financial Policy Committee, which is part of Britain’s financial regulation system. At the central bank, he is known for improving communication with large financial organizations and keeping closer ties with chief risk officers.

“Paul has contributed immeasurably to a series of critical financial reforms, including policies to end too big to fail and to build more resilient derivative and funding markets,” said Mr. Carney, who is due to take the top job at the Bank of England on July 1. He added that he would like to continue a “close dialogue on how to build a more resilient financial system that more effectively serves the needs of the real economy.”

In a letter to Mr. Tucker published on the Bank of England’s Web site, George Osborne, the chancellor of the Exchequer, wrote that he was grateful to Mr. Tucker for his service and “a tremendous contribution to U.K. monetary and financial policy.”

“I have no doubt that you will continue to make a towering contribution to the international economic community,” Mr. Osborne wrote. “I hope that we stay in touch.”

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Stephen Poloz Named Bank of Canada Governor

Incoming Bank of Canada Governor Stephen Poloz, 57, worked at the central bank for 14 years earlier in his career. But he has spent the last 14 years at Export Development Canada.

Poloz takes over as central bank chief on June 3 when Mark Carney leaves, a surprise for markets, which had tipped Carney’s senior deputy Tiff Macklem as the most likely choice. Carney becomes governor of the Bank of England on July 1.

In his debut with reporters, Poloz was careful not to contradict the views that Carney and the central bank expressed in their quarterly economic report last month.

“We are in a recovery that is not as vigorous as would normally be expected and … I think it will be necessary to nourish it, I don’t know for how long,” Poloz said in an introductory news briefing in Ottawa.

Canada’s economy recovered well from the 2008-09 recession thanks to aggressive government spending, tax cuts and record-low interest rates. But growth stalled last year, with the economy recording its slowest two quarters of growth since the crisis.

The Bank of Canada has kept its key rate on hold at what it describes as a stimulative 1 percent since 2010. But it has signalled for the past year that the next move will be a rate hike, not a cut. ID: nL2N0D40HM

Poloz said exports now needed to fuel the Canadian economy, and he believed this was already starting to happen. Canada unexpectedly recorded a trade surplus in March, the first monthly surplus after a year of deficits.

“In my judgment, it’s looking promising. I hope you agree with that,” he said, turning to Carney, who smiled broadly: “Yes, absolutely,” Carney replied.

Analysts do not expect Poloz to rethink central bank policies, especially because of his experience working there earlier in his career. The bank, which guards its independence jealously, targets inflation of 2 percent, but has said it will be flexible with the timeline for reaching that target in difficult economic times.

“The move was a surprise, but I don’t look for any change in monetary policy,” said Craig Wright, chief economist at Royal Bank of Canada.

Unlike the U.S. Federal Reserve or the Bank of England, there are no discernible “hawks” or “doves” among the Bank of Canada’s six governing council members because the council reaches decisions by consensus and takes pains to speak from a common script at public appearances.

Poloz will serve a seven-year term.

In a Reuters poll on April 10, Poloz was seen as the second most likely candidate to get the job after Macklem.

Poloz appeared upbeat about signs of gradual cooling of the once-hot Canadian housing market and a slowing in record-high household debt levels in Canada – both top concerns of Finance Minister Jim Flaherty.

“Of course it’s a concern in the sense of where we are,” Poloz said. “However, the evolution appears to be constructive, and I think that’s great, for us to continue to watch that and to, if you like, nurture that process of a return to more normal conditions.”

Economists have said Poloz has the credentials to succeed as governor and that he was viewed as a governor-in-waiting in his previous period at the central bank.


He is a good communicator, described by one person as “folksy” in his speeches but also whip-smart. He worked at a private-sector financial research firm in Montreal for five years after leaving the central bank.

Poloz joined EDC, a quasi-independent organization that provides loans to importers of Canadian goods, in 1999 as its chief economist and became president of the agency in 2010.

One possible strike against him was the perception among some market players that he may be more sympathetic than his predecessors to exporters’ complaints about the strong Canadian dollar and lean towards a weaker currency.

RBC assistant chief economist Paul Ferley dismissed that notion.

“This would do a disservice to Poloz’s early career at the central bank where the priority is to set monetary policy to achieve an appropriate rate of inflation,” he said.

Poloz will have only about a month to transition to his new role, much shorter than the four months Carney had between his appointment in October 2007 and his first day of work in February 2008.

This is the third time in a row that the top job at the Bank of Canada has gone to an outside candidate rather than to the most senior internal policymaker, in this case Macklem.

Macklem said in a statement that he would stay with the bank and looked forward to working with Poloz.

(Reporting by David Ljunggren and Louise Egan; Editing by Janet Guttsman, Peter Galloway and Paul Simao)

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Bank of England Keeps Interest Rate at Record Low

LONDON — The Bank of England decided to keep its benchmark interest rate unchanged on Thursday amid doubts about the strength of Britain’s economic recovery.

The central bank left its interest rate at 0.5 percent, a record low, and also held its program of economic stimulus at £375 billion, or about $560 billion. Some economists had expected the central bank would expand its stimulus program to help keep the economy from falling back into recession, from which it emerged only in the third quarter of last year.

Britain’s central bank has been focusing on reviving economic growth by keeping interest rates low and encouraging banks to lend more even though inflation continued to hover above the central bank’s 2 percent target. The pound has been tumbling since the beginning of this year and fell to the lowest level in almost three years as some investors anticipate the central bank to inject more money into the ailing economy.

Brian Hilliard, an economist at Société Générale in London, said more stimulus, or so-called quantitative easing, was just a matter of time.

“If you’re worried about growth and not inflation, you’re going back to quantitative easing,” Mr. Hilliard said.

But he also warned that allowing the pound to fall could be a risky strategy because it would ultimately push up the price of goods and services in Britain. Higher consumer prices could damage economic growth, he said.

Mervyn A. King, the governor of the Bank of England, who is due to be replaced by the Canadian Mark Carney in about four months, was one of three monetary policy committee members last month who voted in favor of more economic stimulus. Mr. King has repeatedly said that more needs to be done to provide credit for businesses. The central bank’s current lending program suffered a setback when lending in Britain fell at the end of last year.

Mr. Carney, who is expected to step down as governor of the Bank of Canada in June, has been trying to dampen expectations in London that he would radically change the way the bank helps the economy. He previously suggested he would continue to allow inflation to remain above the target while seeking to revive the economy.

Signs of an economic recovery remain weak. Retail sales rose last month but manufacturing surprisingly shrank in February and activity in the construction sector also declined.

Britain lost its triple-A credit rating last month from Moody’s Investors Service, which cited continuing weakness in the economy. The rating cut was widely expected but still offered ammunition to those critical of Prime Minister David Cameron’s austerity plan. The opposition Labour Party argued the debt downgrade was proof that the austerity measures went too far and were strangling growth.

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British Banks May Be Undercapitalized, Bank of England Governor Warns

The central bank said in a report that current capital ratios at major British banks — a measure of their ability to withstand financial shocks — were probably insufficient because possible future losses and costs of bad loans or other past business decisions might be bigger than expected.

The Bank of England also said that banks should be more transparent in communicating their credit buffers and look more prudently at risks to their financial soundness.

“We need to ensure that reported capital ratios do in fact provide an accurate picture of banks’ health,” Mervyn A. King, governor of the Bank of England, said during a press briefing as he presented the report. “At present there are good reasons to think that they do not.”

Capital ratios at the four biggest British banks — Barclays, Royal Bank of Scotland, Lloyds Banking Group and HSBC — could be overstated by £5 billion to £35 billion, or $8 billion to $56 billion, according to a hypothetical example in the report. That means that the banks would, under certain situations that the central bank did not disclose, need to raise an additional £5 billion to £35 billion.

The central bank declined to give a more concrete figure on how much it thought the banks should raise. Mr. King, whose term as governor ends next summer, has previously suggested that banks should cut bonuses and use the money to expand capital buffers. He has repeatedly warned during his tenure that banks’ capital cushions are too thin.

Mr. King said Thursday that banks would not have to turn to taxpayers for more capital. Initiatives by the Treasury and the Bank of England, including cheaper financing for banks if they commit to increased lending, have been helping banks to access funds.

The Bank of England called on the Financial Services Authority, Britain’s financial regulator, to talk to the banks and encourage a more realistic valuation of their assets, future costs and risks.

The F.S.A. should sit down with the banks and say, “Look, I think you should look more prudently” at the credit levels, Mr. King said.

He did not suggest that banks were dishonest in booking provisions or taking into account future possible losses. But he said that reporting standards did not require them to be more vigilant and therefore many banks were unwilling to be more prudent about possible future losses.

As part of its new regulatory powers, which take full effect next year, the Bank of England could be stricter with how banks report their capital levels. And it could require them to be more conservative in assessing future risks. But so far, there has been little consensus on exactly how much capital is needed or how banks would be allowed to raise it.

Barclays and Royal Bank of Scotland did not comment on the report.

The new regulatory regime in Britain, which includes the Bank of England’s financial policy committee, is to be in place when the bank’s next governor takes over in July. The government this week named Mark J. Carney, the head of the Canadian central bank, to take over from Mr. King.

Mr. King said Thursday that the additional capital was needed because even though the sentiment in financial markets had “improved a little,” global growth remained weak and “significant adjustments” on debt in the euro zone were still expected.

Lloyds, Barclays and R.B.S. have had to recently increase the amount they set aside to compensate customers who were inappropriately sold some payment insurance, raising concerns among investors that such provisions could rise further.

It is also not yet clear how much banks may have to pay in penalties as a result of the continuing investigations into the rigging of the London interbank offered rate, or Libor.

Higher capital levels should help banks to regain investor confidence and, as a result, make it easier and less expensive for them to raise money in the financial markets, Mr. King said.

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Britain Picks a Canadian to Lead Bank of England

The appointment ended months of jockeying by some of Britain’s most prominent public officials. As a result of changes to take effect next year, the job will come with sharply enhanced powers.

The odds had been seen as heavily favoring the Bank of England’s deputy governor, Paul Tucker. The decision to select a foreigner to lead the bank, Britain’s most storied financial institution and the equivalent of the Federal Reserve in the United States, came as a shock when George Osborne, the chancellor of the Exchequer, broke the news during a session of Parliament.

The appointment was arguably the most significant in the bank’s 318-year history. Mr. Carney will not only be the first foreigner to lead the bank, but will also take responsibility for the health of the British financial system.

Besides doing the traditional job of setting interest rates, the central bank will directly regulate and oversee the country’s banks and other financial institutions. Until now, such regulation and oversight has been primarily the job of the Financial Services Authority, which will be scrapped.

“I see this as a challenge and I’m going to where the challenge is the greatest,” Mr. Carney said at a news conference in Ottawa.

Mr. Carney will assume the governor’s post in July, and the pressures facing him will be immense. Not only must he decide whether to continue Britain’s aggressive money-printing program aimed at stimulating the economy, he must also ensure that the central bank’s independence and reputation are not sullied by an investigation into the manipulation of key interest rates by commercial banks.

Indeed, the decision to pick Mr. Carney seems to have been heavily influenced by the taint of the interest-rate scandal that, although it has largely subsided, remains attached to Mr. Tucker.

As the scandal was erupting this year, the disclosure of e-mail exchanges dating to 2008 between Mr. Tucker and Robert E. Diamond Jr., the chief executive of Barclays at the time, suggested that Mr. Tucker might have supported the idea of keeping rates artificially low.

Mr. Carney, a former Goldman Sachs executive, is widely admired for the steady job he has done in preserving financial stability in Canada in the face of pressures that have shaken other countries.

The Bank of England’s new heft represents a stark shift from the era of light regulation that held sway before the financial crisis, in which its ability to issue warnings and intervene in banking excesses were constrained.

“This is a new job,” said Simon Hayes, an economist at Barclays. “Previously, the focus was mainly on monetary policy. Now, it is about financial stability, monetary policy and macro-prudential policy. The key is to get the right mix of policy and making sure there is proper coordination” with the Exchequer, or British Treasury.

Mr. King, who will remain as central bank governor until next summer, has emerged as Britain’s most vociferous critic of irresponsible bank behavior. But he has also been criticized for acting too slowly in 2007 to bail out Northern Rock, the mortgage lender whose collapse that year was the onset of Britain’s financial crisis.

The central bank’s broader regulatory powers will be wielded by a newly formed Financial Policy Committee, operating inside the bank and presided over by the governor. The framers of the new structure hope the bank will be better able to sniff out early warning signals, like excessive risk-taking and borrowing by the banks, and move to defuse a crisis — something it was not able to do in 2007.

Reflecting the importance of the position, Mr. Osborne cast a wide net in searching for a successor and took the unusual step of considering candidates from outside Britain. The names of prominent investment bankers also surfaced as potential chiefs, indicating the hunger for an innovative appointment.

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DealBook: British Bankers Group Seen Losing Control Over Libor

Banks at Canary Wharf in London.Andy Rain, via European Pressphoto AgencyBanks at Canary Wharf in London.

LONDON – The British Bankers’ Association is expected to lose control over the interest rate at the center of a recent manipulation scandal, according to a person with direct knowledge of the matter.

The move is likely to be announced on Friday, when Martin Wheatley, managing director of the Financial Services Authority, the British regulator, outlines the findings of a review of the London interbank offered rate, or Libor, added the person, who spoke on the condition of anonymity because he was not authorized to speak publicly.

The British government called for changes to the benchmark interest rate, which underpins more than $360 trillion of financial instruments worldwide, after Barclays agreed to pay $450 million in June to settle charges that some of its traders manipulated the rate for financial gain.

In the wake of the scandal, Barclays’ chief executive, Robert Diamond Jr., and its chairman, Marcus Agius, resigned. Some of the bank’s traders may still face criminal prosecution over their role in the manipulation of Libor. And other banks, including UBS and Citigroup, are currently under investigation in a number of jurisdictions about the potential manipulation of the rate.

The move to remove the British Bankers’ Association from its role of setting Libor would be a blow to the organization, which established the rate in 1986.

Libor Explained

Regulators have continually questioned the trade body’s role in the recent scandal.

In documents released by the Bank of England in July, authorities called on the group to change the Libor rate-setting process, which includes a daily poll of a number of banks about what interest rate they would pay if they had to borrow money from the capital markets.

Despite calls from the British Bankers’ Association’s chief executive at the time, Angela Knight, for regulators to take a greater role in the rate-setting process, authorities balked at taking a more hands-on approach, according to the central bank documents.

By taking the Libor-setting process away from the bankers group, it is likely that authorities will now become more directly involved.

A spokesman for the Financial Services Authority of Britain declined to comment.

In a statement, the British Bankers’ Association said that it would work with British authorities about potential changes to the rate.

“If Mr Wheatley’s recommendations include a change of responsibility for Libor, the B.B.A. will support that,” the organization said in a statement.

A spokesman for the British Bankers’ Association declined to comment on whether the organization would lose control of setting Libor.

The expected overhaul of Libor comes a day after Gary Gensler, chairman of the Commodity Futures Trading Commission in the United States, suggested authorities should rework or replace the interest rate.

“It is time for a new or revised benchmark – a healthy benchmark anchored in actual, observable market transactions – to restore the confidence of people around the globe that the rates at which they borrow and lend money and hedge interest rates are set honestly and transparently,” Mr. Gensler told the European Parliament on Monday in remarks delivered via video from Washington.

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DealBook: British Bank Chief Denies Getting Warning on Rates

Mervyn A. King, governor of the Bank of England, addressed a parliamentary committee on Tuesday.ReutersMervyn A. King, governor of the Bank of England, addressed a parliamentary committee on Tuesday.

8:05 a.m. | Updated

LONDON – Senior British officials said on Tuesday that they did not receive warnings from the Federal Reserve Bank of New York about possible rate-rigging during the financial crisis of 2008.

Speaking to a British parliamentary committee on Tuesday, Mervyn A. King, governor of the Bank of England, said discussions with American authorities had instead focused on ways to improve the London interbank offered rate, or Libor.

Timothy F. Geithner, who then ran the New York Fed, sent an e-mail to Mr. King in June 2008 that outlined reforms to the Libor system. They included recommendations that British officials “strengthen governance and establish a credible reporting procedure” and “eliminate incentive to misreport,” according to documents released last week.

Mr. King said the correspondence with Mr. Geithner, who is now the United States Treasury secretary, did not represent a warning about potential illegal activity related to Libor.

“At no stage did he or anyone else at the New York Fed raise any concerns with the Bank that they had seen any wrongdoing,” Mr. King told the parliamentary committee on Tuesday. “There was no suggestion of fraudulent behavior.”

Mr. King also provided additional detail about his discussions with Mr. Geithner concerning Libor.

The two men met in Basel, Switzerland, in May 2008 during a regular meeting of central bankers from the world’s leading economies. During a conversation, Mr. King said he had asked Mr. Geithner to submit suggestions about potential changes to the Libor system, according to Mr. King’s testimony on Tuesday.

The discussion was followed by several phone calls between Paul Tucker, deputy governor of the Bank of England, and William C. Dudley, the current president of the Federal Reserve Bank of New York, who was the executive vice president of its markets group at the time of the discussions.

Mr. King said the New York Fed did not share internal memorandums, which questioned whether international banks were accurately reporting their Libor submissions. American authorities began collecting information as early as 2007 about potential problems with the rate-setting process.

“Our contacts at Libor contributing banks have indicated a tendency to underreport actual borrowing costs,” New York Fed officials wrote in one of the memos, “to limit the potential for speculation about the institutions’ liquidity problems.”

Mr. King said some of the recommendations about changes to Libor that Mr. Geithner had sent in 2008 were included in a report by the British Bankers’ Association, the trade body that oversees the rate. The industry association released a review in late 2008 that outlined changes to the Libor process.

“At no stage did the New York Fed express any concerns about the final outcome,” Mr. King told the parliamentary committee.

Senior British officials said they did not believe the New York Fed’s recommendations were a warning that Libor was being manipulated, according to Mr. Tucker of the Bank of England, the country’s central bank. Suggestions from American authorities included how to “eliminate incentive to misreport” Libor submissions, as well as expanding the number of international banks that participated in the rate-setting process.

The recommendations “didn’t set off alarm bells,” Mr. Tucker said on Tuesday.

Mr. Tucker’s role in the rate-manipulation scandal was again questioned after new e-mails were released on Tuesday that detailed his discussions with Robert E. Diamond Jr., former chief executive of Barclays.

Documents from Barclays and government authorities show that the Bank of England official called Mr. Diamond in October 2008 to discuss the firm’s funding position at the height of the financial crisis. Regulators said Jerry del Missier, a top Barclays executive, later misinterpreted that conversation as an instruction from the British central bank to lower the firm’s Libor submissions.

The new e-mails released by the Bank of England show that Mr. Tucker had written to Mr. Diamond about Libor as earlier as May, 2008.

The documents also illustrate a close relationship between Mr. Diamond and the government official. After it was announced that Mr. Tucker would become deputy governor of the Bank of England in December 2008, Mr. Diamond e-mailed to congratulate him: “Well done, man. I am really, really proud of you,” Mr. Diamond wrote.

Mr. Tucker was equally friendly in his response. “Thanks so much Bob. You’ve been an absolute brick through this,” he said in an e-mail reply.

British lawmakers also questioned the senior officials on Tuesday about the steps that led to Mr. Diamond’s resignation this month. The British bank agreed to a $450 million settlement in June in connection with the manipulation of Libor.

Two days after the settlement was announced, Adair Turner, chairman of Britain’s Financial Services Authority, talked to Barclays’ chairman, Marcus Agius, about whether Mr. Diamond was the right person to lead the bank.

The Financial Services Authority had previously raised concerns about the bank’s corporate culture, and Mr. Turner said there were questions about whether Mr. Diamond was the most appropriate individual to lead the changes in governance inside Barclays.

The conversation was followed by a discussion between Mr. King and Mr. Agius on July 2, during which Mr. King said Mr. Diamond no longer had the support of the Financial Services Authority.

After the discussion, Mr. Agius held a conference call with the bank’s nonexecutive directors, who decided to ask Mr. Diamond to resign.

“If Bob Diamond had stayed on,” Mr. Turner told the parliamentary committee on Tuesday, “I strongly suspect that it would have been to the disadvantage of shareholders as well.”

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