Barclays’ Diamond Blames Libor Fixing on Other Banks, Regulators

Former CEO of embattled Barclays Bob Diamond sought to place the blame for Libor fixing on other banks and on regulators when he testified before the Treasury Select Committee, saying that Barclays was consistently at the high end of the reporting range and that he was “disappointed” regulators failed to act on Barclays’ advisements that other banks were manipulating their reports. Moody’s cut its outlook and threatened a downgrade, while investors in banks involved in the scandal could find themselves on the short end of the stick.

Bloomberg reported Thursday that when lawmakers asked Diamond why he took so long to discover that Barclays was manipulating its rate, he replied that Barclays was not the only one and that Barclays had reported higher rates than its brethren.

In his testimony, Diamond also referred to documents the bank released on Tuesday that said Paul Tucker, deputy governor of the Bank of England (BoE), had called Diamond to express Whitehall’s concern over the bank’s consistently high Libor rates. Senior officials in the government, Diamond cited Tucker as saying, were worried over the rates Barclays was reporting. The former CEO also said that Tucker told him the bank did not always need to report such high rates—something BoE has denied.

Diamond also said he had told Tucker that other banks could not be borrowing money at the rates they reported. He also expressed concern over the possibility of a government takeover of Barclays, and was quoted saying, “If Whitehall then was told Barclays was at the highest in Libor, they might say to themselves, ‘my goodness, they can’t fund; we need to nationalize them,’ as they had nationalized other British banks.”

Tucker has asked to give his own version of the conversation to officials “as soon as possible,” according to a statement issued by BoE, which said in part, “Mr. Tucker is keen to give evidence to the Committee in order to clarify the position with regard to the events involving the Bank of England, including the telephone conversation with Bob Diamond on 29 October 2008.”

Diamond also said he was not aware of the rate rigging till a week before regulators made their findings public. Yet he called officials’ attention to numerous warnings from the bank about other banks’ Libor rate reports, and that did not sit well with Parliament.

Scottish National Party lawmaker Stewart Hosie was quoted commenting, “I’m asking why people at Barclays noticed other people doing this, but were unable for whatever reason to recognize what was going on internally.”

Conservative committee member and former Barclays banker Andrea Leadsom challenged the bank’s compliance officers’ apparent ignorance of the rate fixing. “I want to focus on the criminality,” she said in the report. “Not the issues of the financial crisis but the actual criminal behavior. Clearly there was a significant amount of collusion going on.”

Officials in Parliament weren’t the only ones to find it peculiar that Diamond was supposedly unaware of what was going on. Michael Trippitt, an analyst at Oriel Securities Ltd. in London, said in the report that the notion that “some of these things only became clear to Bob” recently “struck me as odd.”

Although during his three hours of testimony Diamond tried to win over his audience, at one point saying to Tory Mark Garnier he was “just looking for a little love,” his efforts were met with derision and scorn.

Comments during Diamond’s testimony were harsh. Among other things, officials accused him of “living in a parallel universe” and of praising the bank’s culture as having saved it, when “it’s the culture that’s the problem.” They also quoted Diamond’s own past remarks back to him, with Pat McFadden of the Labour Party saying, “You have come to symbolize a culture that itself needs changing.”

John Mann of the Labour Party said his constituents looked upon Diamond as running a “rotten, thieving bank.” He also proposed to Diamond that he donate his annual bonuses to a charity for the homeless. “Either you were complicit in what was going on, or you were grossly negligent, or you were incompetent,” he said in the report.

Andrew Tyrie, Conservative chair of the committee, afterward described Diamond’s explanation of the scenario as “somewhat implausible” and was quoted saying, “Cumulatively, the whole thing looks a fairly sorry tale from the point of view of the culture of Barclays.”

Moody’s Investors Service said Thursday it may cut Barclay’s A2 credit rating, and cited increased uncertainty for the business in the wake of the departure of its three top executives. In its statement, it also said that it had cut its outlook on the bank from stable to negative.