The deputy governor of the Bank of England today "absolutely" rejected suggestions he had leant on Barclays to manipulate a key lending rate or that Labour ministers had encouraged him to do so.
Paul Tucker told MPs that a record of a contentious phonecall he had with former Barclays boss Bob Diamond about Libor gave the "wrong impression".
Mr Tucker told the Treasury Select Committee that he had intended to ensure Barclays was not "inadvertently sending distress signals" about its financial health at a time when the market viewed the bank as the next in line for a Government bailout.
ITV News' Economics editor, Richard Edgar reports.
The deputy governor rejected claims that the then Downing Street chief of staff Sir Jeremy Heywood, then City minister Ed Balls and former Treasury minister Baroness Vadera had asked him to pressure Barclays to lower its Libor submissions.
Labour seized on his comments as proof that Chancellor George Osborne was wrong when he claimed that figures in Gordon Brown's inner circle were involved in putting pressure on the bank and have demanded a public apology
Shadow chancellor Ed Balls said:
"It is now absolutely clear that the Chancellor's allegations last week were totally false and completely without foundation.
"George Osborne should now publicly withdraw these false allegations and apologise.
Barclays has been the focal point for a row over banking culture after the bank was fined £290 million by UK and US regulators for manipulating the Libor, which affects mortgages and loans.
Mr Tucker found himself in the spotlight after Mr Diamond published his account of a phonecall, in which it has been suggested Mr Tucker was encouraging the bank to submit lower Libor submissions in light of concerns from senior Whitehall figures.
The deputy governor said Mr Diamond's note gave the "wrong impression".
Mr Tucker said that concerns about Barclays' submissions existed at the time he spoke to Mr Diamond in October 2008 not only in Whitehall but also in the markets.
After the launch of a package of co-ordinated international efforts to shore up the markets earlier in the month, both officials and markets were monitoring Libor and found that - compared to many other participants which had lowered their submissions - "Barclays continued to pay higher rates in the market, as reflected in their Libor submissions".
The governor said there was concern that Barclays was "next in line" to collapse and require taxpayer assistance after Royal Bank of Scotland and Lloyds Banking Group.
Mr Tucker said he contacted Mr Diamond to discuss its high Libor submissions because the economic climate was "fragile" and banks needed to be careful.
Asked how he responded to claims that the Bank was attempting to influence Barclays into submitting lower rates,
Mr Tucker said: "I thought I needed to come and see your committee about what's going on."
Asked if Mr Diamond and his right-hand man at Barclays Capital, Jerry del Missier, had been "unreasonable" in misinterpreting his phone call, Mr Tucker said it was his understanding that it was not misinterpreted.
– The Bank of England's Deputy Governor, Paul Tucker
"I wanted him (Mr Diamond) to be sure that the senior management of Barclays was overseeing the day-to-day operations so the money markets did not inadvertently send distress signals. It's important not to come across as desperate.
"It was not remotely in my mind that it could be misinterpreted by Mr Diamond."
Mr Tucker also described the setting of the Libor rate as "a cesspit" and called for an end to the practice of "self-certification" under which banks submit figures on the basis of their own judgments rather than actual transactions.
He said the review of the operation of Libor being undertaken by the Financial Services Authority's Martin Wheatley should also look at all indices which rely on self-certification.
Mr Tucker said the Bank of England preferred Libor to be based on real transactions, rather than banks' assessments of the rates at which they believed they could borrow.
But he stressed the BoE was not responsible for operating Libor and had no regulatory responsibilities over it.