Diamond ‘threatened stability of Barclays’
CITY regulators have rejected claims by the Treasury Select Committee that they pushed Bob Diamond out of his job at Barclays in a knee-jerk reaction to public fury at the Libor rate-rigging scandal.
Regulatory sources said the FSA and the Bank had changed their view not to placate the public, but because collapsing confidence in Diamond’s leadership was a threat to Barclays’ stability.
The committee’s damning report on the scandal, published yesterday, focused its criticism on Barclays’ culture and poor internal policing of traders and on Diamond’s public testimony to MPs, which it said fell short of the standards of frankness and candour it expected.
But it also warned that the way Diamond was driven from his job as chief executive of Barclays reflected badly on the Bank of England and the Financial Services Authority.
It said: ‘Neither the FSA nor the Bank of England should intervene to remove senior bank executives to placate public, media and parliamentary opinion.’
‘The position changed,’ the source said. ‘The hurdle the Barclays board had to get over to recover market confidence became greater by the weekend.’
Their criticism came because the mounting pressure for Diamond to stand down grew at the weekend five days after the Libor scandal was made public by the FSA.
Neither the regulator nor the Bank commented directly on the claim that they had tried to placate public opinion, but the Bank did point out that in future the suitability of bank bosses to hold their posts would be assessed by a panel of experts and not by one individual.
The committee report blamed regulators and the Government for failing to act quickly enough over warnings that Libor could be rigged. But it appeared to rule out the idea that officials had secretly sanctioned the rigging.
The Bank of England’s Deputy Governor, Paul Tucker, had been suspected at one point of passing on an instruction to Barclays from the Government to reduce its Libor quote to calm financial markets. The report, though critical of the bank’s record of conversations, accepted that this was not the case.
Libor is a measure of the interest rates banks charge each other to borrow money. It is used as a benchmark for billions of pounds worth of contracts and is also regarded as a useful measure of how confident the market is in a bank’s finances.
Bob Diamond hit back at the report, saying he strongly challenged the doubts cast by the Treasury Select Committee on his testimony. ‘I answered every question that was put to me to me truthfully, candidly and based on information available to me. I categorically refute any suggestion to the contrary,’ he said. And Diamond also rejected criticism of the culture at Barclays. ‘I am proud of what we accomplished over the 16 years I was employed there and our prudent management of the institution helped avoid the fates that befell other UK banks in 2009. The picture being presented today of what Barclays stood for under my watch could not be further from the truth.’