Libor rigging scandal: FSA warned Barclays about Bob Diamond and senior management
- By Harry Wilson, Banking correspondent
The Barclays board was warned less than six months ago that the relationship between the bank's senior management and the Financial Services Authority had "broken down".
Andrew Tyrie, chairman of the Treasury Select Committee, on Wednesday revealed that senior figures at the regulator told Barclays' board in February that former chief executive, Bob Diamond, and his management team had lost their confidence.
Mr Tyrie added that the FSA had also raised concerns about Mr Diamond's appointment as chief executive in September 2010 and had sought assurances that there would be "a change of culture at Barclays".
Barclays is likely to come under pressure to release letters and other documents related to the concerns raised by the FSA. Mr Tyrie is expected to write to the bank asking for them to be made public.
The revelations came as the American-born banker was quizzed by MPs on the Libor rigging scandal in his first public appearance since the bank's admission that it had attempted to manipulate the world's key borrowing rate.
In a three-hour hearing, Mr Diamond said he had felt "physically ill" when he first became aware of the emails that showed Barclays traders had asked the bank's Libor submitters to falsify the lender's borrowing rate entries.
Mr Diamond, who resigned from the bank on Tuesday, attempted to distance himself from the scandal. He said he had become aware of what had gone on just days before the results of the investigation by US and British authorities were made public.
"I don't feel personal culpability," said Mr Diamond.
Instead, the former bank chief said the Barclays treasury team – responsible for funding the bank's operations – had been behind the so-called "low-balling" of Libor submissions during the financial crisis.
"There was pressure from group treasury," said Mr Diamond, adding that the division had wanted to "get in the pack" as it felt the bank's Libor rates were higher than those being published by its peers. The bank boss suggested other banks' submissions were false: "Some couldn't fund at any level."
While refraining from openly criticising regulators, Mr Diamond did suggest they should have cracked down on the problem. "There was an issue out there and it should have been dealt with."
He said the bank would not "stand in the way" of any criminal investigations into misconduct by the staff. However, he repeatedly insisted the breaches had been the work of a small group of traders and that he had remained ignorant throughout of what was going on inside the division he was then running.
MPs repeatedly questioned Mr Diamond on the nature of his conversation with government officials and representatives of the Bank of England and the FSA.
The questioning focused on the controverisal call between Mr Diamond and Paul Tucker, Deputy Governor of the Bank of England, in late October 2008.
A email detailing the conversation was released on Tuesday evening by Barclays. The email, sent by Mr Diamond to John Varley, the bank's then chief executive, and Jerry del Missier, then a senior investment banker, has become central to claims that officials had given Barclays tacit permission to lower its Libor submissions.
In the email Mr Diamond states: "Mr Tucker stated the levels of calls he was receiving from Whitehall were 'senior' and that while he was certain we did not need advice, that it did not always need to be the case that we appeared to be as high as we have recently."
Mr Tyrie suggested the email could easily be read as approval for Libor supression from the Bank. However, Mr Diamond claimed he understood Mr Tucker's comments to be a "heads up" that unnamed senior government officials were concerned about the bank's financial health at the time.
Several former Labour government ministers have already denied they gave any instructions that could have suggested Barclays had a greenlight to submit lower Libor rates.
Mr del Missier resigned hours after Mr Diamond on Tuesday and has been blamed for interpreting the email as an instruction to lower the Barclays Libor submission.
"Jerry was very honest about miscommunication between the Bank of England and he was the person that instructed [people to change Libor]. I can't put myself in Jerry's shoes. The FSA cleared Jerry and concluded that it was a misunderstanding."
Barclays chairman Marcus Agius is expected to give evidence to MPs next week along with other non-executive directors of Barclays.
Mr Agius announced his own resignation from the bank on Monday in a failed attempt to take the heat off Mr Diamond.
The Barclays board is considering what pay off it should award to Mr Diamond. If they choose to, they could attempt to force him to forfeit pay and bonuses worth up to £20m, as well as clawing back bonuses awarded in previous years.
Mr Diamond declined to say whether he would voluntarily give up shares and options, saying it was a matter for the board.
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