Former head of Barclays pulls back from implicating Bank of England
FORMER BARCLAYS chief executive Bob Diamond yesterday pulled back from a head-on clash with British regulators and politicians during a three-hour appearance before MPs where he defended his record at the bank.
On Tuesday, the bank published a note made by Mr Diamond during the height of the financial crisis in 2008, which claimed that senior figures in Whitehall had put pressure on the Bank of England to get Barclays to lower its daily quote for the Libor inter-bank market.
Mr Diamond pulled away from pursuing the confrontation yesterday before the House of Commons treasury committee, saying he had not believed he had been instructed by the Bank of England deputy governor, Paul Tucker, to cut Libor rates.
The Diamond email provoked Mr Tucker, whose chances of winning the Bank of England’s governorship will be hurt if he is tainted by the scandal, to request a rushed appointment before the treasury select committee.
Saying he only learned of the 2008 breaches once investigations by UK and US authorities reported, Mr Diamond said Barclays had argued then that other banks were manipulating quotes. However, he did not explain why Barclays had not checked on their staff’s behaviour.
Mr Diamond said he became “physically ill” as he read the email exchanges involving 14 Barclays traders, some of whom had promised bottles of champagne to colleagues as thanks for lower quotes.
Labour MP John Mann said: “You seem to have seen nothing, heard nothing, know nothing. You’re in charge and you’re not even asking questions internally and people who are acting criminally are not coming to you.
“You must be grossly incompetent if you were not complicit,” said Mr Mann, who received repeated declarations, as did other MPs, from Mr Diamond that the behaviour of all involved was “reprehensible and wrong”.
Barclays was fined £290 million (€360 million) by US and UK regulators for fraudulent declarations between 2005 and 2007 – which helped to boost the banks’ profits and traders’ bonuses; while it produced unrealistically low quotes in 2008 in a bid to show that the bank was not in trouble.
Defending his reputation, Mr Diamond said he had operated by the code set by Barclays’ Quaker founders 300 years ago of “honesty, integrity and fair dealing”, while he denied that his “hard driving reputation” had spurred reckless actions by staff.
However, Mr Diamond, who has been paid £100 million since 2005, refused to offer to give up some or all of the £20 million he is due in share options, saying his departure payment is “a matter for the board”.
Meanwhile, chancellor of the exchequer George Osborne exonerated the Bank of England, but insisted that Labour ministers of the period face questions because they “were clearly involved” in Libor manipulation.
Mr Diamond became chief executive of Barclays in September 2010, having previously served as the head of Barclays Capital, which he built up from practically nothing into one of the leading investment banks in the world.
Questioned by MPs, who landed few if any blows, Mr Diamond said Barclays had been concerned that its original 2008 Libor quotes – though accurate – were being seen by Whitehall as evidence that the bank could not raise money.
In October 2008, Barclays was on the point of securing £7 billion worth of Gulf investment and that the bank was fearful its Libor quotes could have persuaded the British government it needed to nationalise the bank, he said.
Each day, 16 banks put in their estimate of what they believe they can borrow at on the inter-bank market – rather than the sum that they have actually paid for borrowings. The top and lowest four quotes are excluded and an average is drawn from the remainder.
Meanwhile, mayor of London Boris Johnson stood unapologetically behind bankers yesterday: “I will not accept that Barclays is a damaged brand, it would be a great shame if they unleash an orgy of self-slaughter. They remain a fine institution and a massive London employer,” he told the Evening Standard.