Monday 18 December 2017

Barclays says call between Bob Diamond and Bank of England led to some of LIBOR rate rigging

Jamie Grierson `

A PHONE call between Barclays boss Bob Diamond and the Bank of England ultimately led to some of the rate-rigging actions at the heart of the ongoing banking scandal, the bank said today.

Jerry Del Missier, who was president of investment arm Barclays Capital at the time, told staff to lower the key interbank lending rate after misunderstanding Mr Diamond's account of the conversation with the BoE deputy governor Paul Tucker.

The details of the conversation were disclosed in documents submitted to the Treasury Select Committee ahead of Mr Diamond's appearance before MPs tomorrow.

The submission was released after Mr Diamond and Mr del Missier stepped down with immediate effect following increased pressure from politicians, shareholders and former Barclays directors in the wake of the scandal.

Barclays has submitted a copy of Mr Diamond's note, sent on October 30 2008 to Mr del Missier, and then chief executive John Varley, on his conversation with Paul Tucker, to the Select Committee.

Mr Diamond said Mr Tucker had flagged concerns from senior figures in Whitehall over why Barclays was always towards the top end of Libor pricing.

Mr Diamond wrote: "His (Mr Tucker's) response was 'you have to pay what you have to pay'."

Mr Diamond said he asked Mr Tucker to explain to his Whitehall contacts that other banks were providing Libor quotes that did not represent real transactions.

The American banker then said Mr Tucker told him the bank's Libor rate did not "always" need to appear as high as it had recently.

Barclays went on: "Subsequent to the call, Bob Diamond relayed the contents of the conversation to Jerry del Missier.

"Bob Diamond did not believe he received an instruction from Paul Tucker or that he gave an instruction to Jerry del Missier.

"However, Jerry del Missier concluded that an instruction had been passed down from the Bank of England not to keep Libors so high and he therefore passed down a direction to that effect to the submitters."

Barclays said there was no allegation by the authorities that this instruction was intended to manipulate the ultimate rate and the bank's submissions had consistently been excluded from the final Libor calculation.

The FSA investigated Jerry del Missier personally in relation to these events and closed the investigation without taking any enforcement action, Barclays added.

Mr Diamond will reportedly be asked to give up nearly £20m in unvested shares awarded to him in previous years.

Alison Carnwarth, chairman of the remuneration committee, will ask Mr Diamond, who was awarded a total of £17.7m in 2011 alone, to hand back the bonuses, Sky News said.

The speculation comes after proxy-voting and corporate governance service firm Manifest estimated Mr Diamond had earned at least £120m since joining Barclays' board in 2005.

Mr Diamond, 60, who was with Barclays for 16 years, is expected to "speak more freely" when he appears before MPs tomorrow now he is no longer at the helm.

Meanwhile, reports claimed Bank governor Sir Mervyn King and Financial Services Authority chairman Lord Adair Turner last night encouraged Mr Diamond's exit.

Mr del Missier took up his current position in June 2012 after spending three years as co-chief executive of corporate and investment banking.

In his most recent role, Mr del Missier was responsible for overseeing the construction of a ringfence around the bank's retail arm, separating it from the investment division, as proposed by the Independent Commission on Banking last year.

Chancellor George Osborne, who yesterday announced a parliamentary probe into banking standards, said Mr Diamond made the "right decision" for the bank and for the country.

While Labour leader Ed Miliband also backed the departure, he continued to call for a full judicial inquiry into banking culture and accused the Prime Minister of failing to recognise "the gravity and scale of this crisis".

Mr Diamond, who was once dubbed the "unacceptable face of banking" by Lord Mandelson, remained defiant in his resignation statement.

"I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth," he said.

He added: "My motivation has always been to do what I believed to be in the best interests of Barclays. No decision over that period was as hard as the one that I make now to stand down as chief executive.

"The external pressure placed on Barclays has reached a level that risks damaging the franchise - I cannot let that happen."

Chairman Marcus Agius, who resigned over the affair yesterday, will remain with the bank to lead the search for a new chief executive before stepping down at a later date.

Despite mounting calls for his departure, Mr Diamond's exit came as a shock as he had showed no signs of leaving his position after pledging to see an internal review through to the end.

IG Index market analyst Chris Beauchamp said Mr Diamond's appearance before MPs could contain "interesting revelations", while Hargreaves Lansdown Stockbrokers' head of equities Richard Hunter said it would throw light on "internal turmoil at the bank".

The Chancellor said a parliamentary review, led by Treasury Select Committee chairman Andrew Tyrie, will look at "transparency, conflicts of interest, culture and the professional standards" in the banking industry.

Speaking after Mr Diamond's resignation, Mr Osborne said: "I think he has clearly taken the view that Barclays has a better future without him than with him."

He added: "But I think it is the right decision for Barclays, I think it is the right decision for the country."

Earlier, Barclays said Mr Diamond's severance pay package is "still under discussion".

The bank's most recent remuneration report, for 2011, said executive directors are entitled to a notice period of 12 months and payment in lieu of notice in instalments.

This means Mr Diamond could be entitled to a full year's salary, which in 2011 was worth £1.4m.

However, the report adds that the remuneration committee's approach when considering payments in the event of termination is to take account of the individual circumstances.

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