Barclays Chairman Marcus Agius resigned from his post after a LIBOR rigging scandal resulted in a fine of 290 million pounds ($455 million). However, despite calls for his ouster as well, CEO Bob Diamond remained at the helm, even as the bank said it would conduct a “root and branch review” of past “flawed” practices.
Reuters reported Monday that Agius resigned while politicians called for Diamond to be booted as well, even as they planned to grill the two later in the week over the details of the scheme. In a statement, Agius said, “Last week’s events—evidencing as they do unacceptable standards of behavior within the bank—have dealt a devastating blow to Barclays’ reputation … The buck stops with me, and I must acknowledge responsibility by standing aside.”
But John Mann, a Labour politician who is part of the group that will question Diamond on Wednesday and Agius on Thursday, was quoted saying, “The buck in Barclays stops with Bob Diamond, and it is Bob Diamond who must accept responsibility.”
Mann added, “He must resign. He’s got to go. There is no role for people like him if banking is to be trusted again in this country and if British banking is to restore its tarnished reputation in the world, which of course is of great importance to our economy.”
Ed Miliband, leader of the Labour party, said in a BBC report that “restoring trust” in British banks was of the utmost importance. “I really don’t think that can be done by Bob Diamond,” he added.
Miliband called for a full public inquiry into the banking industry and the introduction of a new professional code for bankers, as well as for criminal charges to be brought against those involved in rate fixing.
Bloomberg reported that Diamond issued a statement saying in part, “I am committed to ensuring that the recommendations from this review are implemented in full.”
However, despite that promise, investors are not pleased with Diamond’s determination to remain at his post. One top 25 investor at Barclays who asked not to be identified was quoted saying, “I still think it is going to be hard for Bob Diamond to keep his job. I don’t think he has built up enough shareholder goodwill in the past to be able to ride this one out.”
Former Barclays director Baroness Wheatcroft said that although Agius was currently “carrying the can,” Diamond’s resignation was “inevitable.”
Agius’s resignation “will do little to appease the many who see Bob Diamond as having primary responsibility,” according to Gary Greenwood, a banking analyst at Shore Capital. Greenwood was quoted saying, “While Agius’s departure will grab the headlines today, the bigger issue remains whether Diamond should also remain.”
Agius, who has also stepped down from his post as chairman of the British Bankers Association (BBA), the industry lobby group that oversees LIBOR, is perceived as unable to rein in Diamond. But he had other problems as well. In 2008 he oversaw the bank’s action to raise more than 5 billion pounds from a group of funds from Abu Dhabi and Qatar, but failed to give existing shareholders the chance to buy new stock. Shareholders including Legal & General Group complained at the time that their pre-emption rights had been ignored; in April of 2009, about 16% of investors protested Agius’s actions by opposing his re-election as chairman.
He has also been criticized for supporting Diamond’s compensation package of 17.7 million pounds, according to the BBC, and after 27% of shareholders expressed their disapproval of that in April, Agius had to apologize to them for failing to clearly communicate the firm’s pay plans to investors.
The bank said that Sir Michael Rake, chairman of the telecommunications company BT Group and senior independent director at Barclays, has been appointed deputy chairman and will lead an audit of its business practices that it described as “a root and branch review of all of the past practices that have been revealed as flawed.” The bank will then assess implications for its practices and culture.
According to documents released in late June, some at the bank were under the impression that Barclays was given permission from the Bank of England (BoE) to submit artificially low LIBOR interest rates after a conversation in October 2008 between Diamond and BoE Deputy Governor Paul Tucker. BoE says that no such permission was given and that Tucker’s recollection of the conversation is substantially different from Diamond’s.
BBA, meanwhile, canceled a party it had planned for later in the week in the wake of the fine against Barclays. In canceling the reception, planned for Wednesday evening, BBA CEO Angela Knight said in a memo, “We regret the short notice but our industry needs to think long and hard about its collective behavior. We believe that in the current circumstances it would be wrong to proceed with the reception on Wednesday evening.”
The LIBOR scandal has already cost Knight her position; in April she said she would step down from the post, and last month the group designated Anthony Browne, a government relations executive at Morgan Stanley, to replace her.
A total of 18 banks are currently under investigation for their role in the LIBOR-fixing scheme, including Citigroup, Royal Bank of Scotland Group, UBS, ICAP, Lloyds Banking Group and Deutsche Bank.
Tracey McDermott, acting director of Britain’s Financial Services Authority, said in the report, referring to Barclays, “I wish I could say this was an isolated case. You will hear more on this in due course.”