UPDATE 1-BoE says backed 2008 NY Fed Libor reform proposals

By David Milliken

LONDON, July 13 (Reuters) - The Bank of England confirmed on Friday the New York Federal Reserve had pressed changes to the way the key Libor interbank interest rate was set in 2008, and that the BoE had urged the British Bankers' Association to take them on board.

Earlier on Friday an email emerged from U.S. Treasury Secretary Tim Geithner - then the president of the NY Fed - to BoE Governor Mervyn King, expressing concern about how Libor was set and suggesting improvements.

The BoE published further correspondence on Friday, in which King told Geithner his proposals were "sensible", and passed them on to the BBA - the industry body that oversees Libor - which was conducting a consultation on how to reform the rate after the crisis.

British bank Barclays received a record fine last month for submitting inaccurate Libor rates, and more than a dozen banks are under investigation in Europe, Japan and the United States over suspected rigging of the global borrowing cost benchmark, which is used in contracts worth trillions of dollars globally.

In an email to BoE Deputy Governor Paul Tucker on June 3 2008, the chief executive of the BBA, Angela Knight, wrote that "changes are being made to incorporate the views of the Fed".

On June 10 2008, the BBA said it would strengthen governance of how the Libor rate was set and widening the number of banks that submitted rates, but stopped short of some of Geithner's other proposals such as randomising the banks whose Libor submissions were used to calculate rates.

It was this last proposal that the New York Fed had put under the heading "Eliminate incentive to misreport".

The BBA declined to comment on the release of the emails on Friday.