In evidence to lawmakers on a parliamentary panel that scrutinizes economic policy in the U.K., Mr. King said the Bank of England had no evidence banks were being deliberately dishonest about their borrowing costs in 2008, even though they agreed with counterparts in the U.S. that the process by which the London interbank offered rate, or Libor, was calculated was flawed.

"We had no evidence of wrongdoing," Mr. King told the Treasury Select Committee. Asked by lawmakers about documents published by the Federal Reserve Bank of New York last week that appeared to contain evidence of false rate reporting, Mr. King said that the Fed never shared those documents with U.K. central bank officials or regulators.

The two central banks did raise concerns about the accuracy of Libor with the British Bankers Association, however, which compiles Libor rates based on quotes provided by a panel of banks, Mr. King said. But he said the prevailing view was that discrepancies in Libor reflected dysfunctional interbank lending markets, not dishonesty.

"We were concerned that everyone in the market had doubts about Libor because of the dysfunctional nature of markets," Mr. King said.

Mr. King acknowledged that he did read a Wall Street Journal news article of May 29, 2008, which highlighted the erratic behavior of the lending benchmark. The article claimed that banks had been reporting significantly lower borrowing costs for Libor than what was indicated by other market measures at the time.

Mr. King said that "if you continue reading [the WSJ article], it says there is no evidence of wrongdoing."

Mr. King's testimony is the latest in a series of hearings by the Treasury Select Committee into the events surrounding Barclays PLC (BARC.LN) agreement to pay roughly $450 million to regulators in the U.S. and U.K. to settle claims that some of its staff attempted to manipulate Libor, both to turn a profit and to mask the bank's true borrowing costs when questions were being asked about its financial health.

Monday, officials from the Financial Services Authority, the U.K. financial regulator, told lawmakers that seven other banks are under investigation in an ongoing probe into Libor-rigging in the U.K.

Mr. King said Tuesday he plans to raise the issue of Libor when senior officials from the world's central banks meet in Switzerland in September under the auspices of the Bank for International Settlements.

"I will put on the agenda a discussion for the future arrangements of this sort of benchmark interest rate," Mr. King said.

In sometimes testy exchanges with lawmakers, the BOE governor and other officials underscored that the BOE and regulators had concerns about how Libor was calculated but never thought there were attempts to deliberately rig it, which Mr. King described as "fraud."

The way Libor was functioning "didn't set off dishonesty alarm bells," said Paul Tucker, the BOE's deputy governor. Mr. Tucker has been at the center of the Libor storm after an email published by Barclays appeared to suggest that he authorized the bank to "lowball" their Libor submissions, a charge he denies.

Mr. Tucker came under renewed pressure Tuesday over his relationship with former Barclays Chief Executive Robert Diamond, after emails made public by a committee lawmaker showed the two exchanged warm messages on Mr. Tucker's promotion to deputy governor in 2008. Mr. Tucker called Mr. Diamond "an absolute brick" in one exchange, a term of affection for a dependable friend.

Mr. Tucker has long been viewed as a leading candidate to succeed Mr. King when he retires as governor next year. Analysts say his candidacy has been hurt by the Libor scandal.

In his testimony, Mr. King said Barclays needs "a change of culture." But the chairman of the parliamentary committee, Andrew Tyrie, later said Mr. King and Adair Turner, chairman of the FSA, had overstepped the mark when they told Barclays' board members they had lost faith in Mr. Diamond's leadership of the bank, which precipitated his resignation.

"Whatever the merits of the action taken in this case, regulators should not be able to bring arbitrary pressure to bear on the boards of private companies," Mr. Tyrie said.

Write to Jason Douglas at jason.douglas@dowjones.com and Paul Hannon at paul.hannon@dowjones.com Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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