The British Parliament got an earful over the last couple of days as testimony continued in the LIBOR-fixing scandal. Mervyn King, governor of the Bank of England (BoE), said Barclays was so blase about the issue that he pushed for CEO Bob Diamond to step down. Jerry del Missier, former Barclays chief operating officer, said he saw nothing wrong with adjusting the bank’s LIBOR submission, since the instruction to do so had come from the BoE. And banks in the investigation faced other woes.
Reuters reported Tuesday that King told Barclays that Diamond must go after the rigging of LIBOR submissions came to light. Diamond had had no intention of resigning, instead intending to head up reforms. However, King was quoted saying, “The Barclays board … was deeply reluctant to face up to the concerns. It became clear to me that they hadn’t really taken on board the loss of confidence.”
King also said that Barclays had to create a new bank and a new culture so that it could move beyond the LIBOR issue, and that a Financial Services Authority (FSA) letter in April to Barclays had already expressed concerns about the bank’s culture. When King met with Marcus Agius, Barclays chairman, on July 2, he said, he clarified the magnitude of the problem with the existing culture at the bank.
He was quoted saying, “All of us involved had built up genuine concern that it is possible to sail close to the wind once. You can sail close twice or maybe even three times. But when it gets to four or five times it becomes a regular pattern of behavior [and you] … have to ask questions about the navigational skills of the captain.” After King’s intervention, Diamond did indeed step down.
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On Monday, del Missier’s testimony to the House of Commons Treasury Select Committee had told something of a different story, as he cited the intervention of Paul Tucker, deputy governor of the BoE, as the reason he instructed bank personnel to adjust Barclays’ LIBOR submissions.
Tucker, on the other hand, had testified that he spoke to Diamond over concerns about the bank’s financial health and funding costs because of the high interest rates the bank was submitting, and not to discuss interest rates or to suggest that they be manipulated lower. Diamond had said in his own testimony that del Missier misinterpreted what he, Diamond, had told him about the conversation.
Del Missier said in the report, “I passed the instruction on to the head of the money-market desk. I relayed the content of the conversation I had with Mr. Diamond and fully expected the Bank of England views would be fully incorporated in the LIBOR submission. I expected that they would take those views into account.”
He added, “At the time it did not seem an inappropriate action given that this was coming from the Bank of England … I only know what I clearly recall from my conversations with Mr. Diamond. I acted on the basis of the phone conversation that I had.” Not just Barclays but also the BoE and the FSA are in the spotlight over the issue. Politicians are demanding to know why no substantive action was taken earlier, particularly since evidence has surfaced that the LIBOR had been manipulated for years and that in May 2008 Timothy Geithner, the U.S. Treasury secretary who at the time was president of the New York Fed, e-mailed King with recommendations to make LIBOR less prone to manipulation.