Bob Diamond, 60, quit this week after Barclays agreed to pay nearly half a billion dollars in fines for manipulating the interest rates at the heart of the global financial system.
British politicians have seized on the case as a symbol of a culture of greed that has poisoned the entire financial industry. Newspapers have highlighted e-mails disclosed in the case which show traders congratulating each other for fiddling figures with promises of champagne.
Appearing thoughtful and humble before a parliamentary committee, the man who until Tuesday was one of the world’s highest paid and most powerful financial executives with an aggressive reputation acknowledged “inexcusable” behaviour among his group’s traders.
“When I read the e-mails from those traders, I got physically ill,” Mr. Diamond said. “That behaviour was reprehensible, it was wrong. I am sorry, I am disappointed and I am also angry.”
He said those involved in rigging interest rates would be subject to criminal investigation and should be “dealt with harshly.”
The wrongdoing was “not representative of the firm that I love so much”, the American banker said. But he also insisted that Barclays was being made a scapegoat because it had co-operated with the authorities to help unearth the misdeeds.
“This week the focus has been on Barclays because they were the first,” Mr. Diamond said, describing years of co-operation with regulatory agencies to uncover the practice.
“I think it’s a sign of the culture of Barclays that we were willing to be first, we were willing to be fast and we were willing to come out with this.”
The bank’s decision to step co-operate with regulators appeared to have been designed to limit damage but it appeared to have backfired, hurting Barclays’ reputation and costing Mr. Diamond his job, banking analysts said.
Of his own decision to step down, a day after saying he wouldn’t, Mr. Diamond said he had realized that he had become a lightning rod for criticism. “The focus of intensity was my leadership. It was better for me to step down.”
Barclays has acknowledged that its traders colluded with others to manipulate the London Interbank Offered Rate, or Libor, the rate that big banks say they borrow from each other which underpins trillions of dollars in global contracts.
In addition to the manipulation by traders, which took place from 2005-2009, Barclays also has admitted it deliberately understated its submissions of Libor rates at the height of the 2008 financial crisis to make its balance sheet look stronger.
MPs questioned Mr. Diamond over a 2008 memo, in which he appeared to suggest that the Bank of England or the government might be giving the firm the nod to report that it was able to borrow money at lower rates to make it look better.
At the time, Barclays was reporting Libor funding costs that were among the highest of the large banks, even though others were in much worse shape.
Mr. Diamond wrote in the memo that the Deputy Governor of the Bank, Paul Tucker, told him “it did not always need to be the case that we appeared as high as we have recently.”
Barclays has said that another senior executive - chief operating officer Jerry del Missier, who also resigned on Tuesday - understood the memo as a green light to submit lower rates.
Mr. Diamond said he interpreted Tucker’s call as a “heads up” that politicians were worried about the rates Barclays was reporting, but not as a green light to fiddle them.
Mr. Diamond feared at the time that if the British government believed Barclays’ costs were higher than those of other banks, it might have nationalized it, as it did with several competitors, he said.
“They might say to themselves, ‘My goodness, they can’t fund. We need to nationalize them.’ ”
The Bank said Mr. Tucker intended to present his own explanation of the phone call to politicians at a later hearing.
Shareholders, meanwhile, just want answers.
“What was the nature of the manipulation? Who was involved, how long were they involved for? Was it escalated? If it was escalated, who was it escalated to?” asked Dominic Rossi at Fidelity Worldwide Investment, a top 10 Barclays investor.
“What did the people who it was escalated to actually do? Who did they inform? Did they inform the regulator? Did they inform the Bank ? If they did, who within the Bank? Who within the FSA (regulator)? These are all the questions that we need to establish.”
The bank said in documents released ahead of Mr. Diamond’s appearance that it was “ironic” that there had been such an intense focus on it alone, as it had been lauded by regulators for its “exceptional level of cooperation” over the Libor probe.
But some investors accuse the bank of missing the “big picture”.
“The board should now proactively break the bank up into its constituent parts after putting in place a coherent bonus and remuneration clawback of all misdemeanours of the last decade, from Libor to mis-selling of mortgage protection and interest rates swaps,” said Neil Dwane, CIO Europe, Allianz Global Investors, which owns 13.4 mln Barclays shares via its RCM unit.
“Break it up because it trades at half book value.”
Libor is compiled by Thomson Reuters on behalf of the British Bankers’ Association from estimates supplied by the world’s biggest banks of the amount they believe other banks will charge them for loans.
Original Article
Source: the globe and mail
Author: Matt Scuffham
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