Barclays' 'culture of pushing the limits'

 

Libor scandal: Del Missier 'instructed' by Bob Diamond

Jerry del Missier's evidence to MPs, coupled with that of Andrew Bailey of the FSA, reinforced what many will see as a depressing picture of Barclays as a giant global bank with pockets of severe rot in its culture.

The former number two at the bank - who resigned just under a fortnight ago - said that he was unaware of systematic lying over several years about the interest rates the bank was paying by traders who worked for him.

For Mr del Missier, this represented "control failures" on his and the bank's part.

He also revealed that when the bank's compliance officers - its internal policeman - were told in the autumn of 2008 by the money-market desk that the Bank of England had instructed Barclays to understate its borrowing costs, none of those internal policemen bothered to check out whether such an instruction had actually been given.

As for the FSA's Mr Bailey, he said that earlier this year he lost patience with what he saw as a habit at Barclays of gaming the rules, or trying to get round them by sticking to the letter but not the spirit.

Mr Bailey said of Barclays: "There was a problem with this institution and the problem came from the tone at the top".

Start Quote

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”

End Quote Jerry del Missier Former Barclays executive's evident to MPs

The FSA's chairman, Lord Turner, saw this problem as "a cultural tendency to be always pushing" the limits of the rules.

Mr Bailey agreed that meant Bob Diamond, who recently resigned as chief executive of Barclays, was not taking sufficient steps to clean up the bank.

What for many will be the most striking element of Mr del Missier's testimony was his clear recollection that Bob Diamond, in a telephone call, had passed on an instruction from the Bank of England to lie about the interest rates Barclays was paying.

That is world's apart from what Paul Tucker, deputy governor of the Bank of England, says he conveyed to Mr Diamond - and differs from Mr Diamond's recollection. Both deny that any such instruction was given.

MPs were understandably bemused by how there could be such extraordinary misunderstandings of such a highly sensitive issue by three such senior City figures.

As for the FSA, there is an apparent contradiction between its lecturing of Barclays to clean up its culture earlier this year and the approval it gave for the promotion of Mr del Missier to be Barclays' number two. That approval was given just days before Barclays incurred record fines and penalties for Libor wrongdoing - which in turn prompted Mr del Missier to resign.

Some will say that shows the FSA is not, to use the cliche, a joined-up organisation, since it was aware Barclays would be severely punished for lying about interest rates.

But, of course, the embarrassment is greatest for Barclays, which is fast losing what is as important to a bank as capital to absorb losses, namely a reputation for integrity and competence.

Unsurprisingly, Barclays' shareholders and regulators are telling the banks' board that in replacing its chairman and chief executive, one of those important jobs must be filled by an outsider.

 
Robert Peston, economics editor Article written by Robert Peston Robert Peston Economics editor

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  • rate this
    +3

    Comment number 50.

    "Pushing the limits..." - sounds almost reasonable, doesn't it?

    You know!... adventurous, innovative... the brightest and the best doing the business.

    All crap! Just like the system.

    Barclays is just another player...

  • rate this
    +2

    Comment number 49.

    Shame he didnt ask for the instruction in writing, for such instructions usually vanish, along with your future usually, but those are the choices

  • rate this
    +3

    Comment number 48.

    What I see is a "culture"/attitude which permeates the whole of British Work, private & public sector with banks as an extreme example & Barclays a bit more extreme than the others. The "revelations" dont surprise me, they reflect the way things are done nowdays, profit & pragmatism before integrity & honesty

  • Comment number 47.

    All this user's posts have been removed.Why?

  • rate this
    +4

    Comment number 46.

    We need to hear from Robert Le Blanc - Chief Risk Officer.
    You don't run traders without careful risk assessment and setting parameters.
    Those details must have been passed up the food chain.

  • rate this
    +1

    Comment number 45.

    It is revelations about scandals like LIBOR that reduce confidence in the management of banks. As soon as people start looking at the real strength of banks, which reservations about competence might lead them to do, they will see there is very little basis for confidence. As Peston has written recently, it is merely a matter of perception whether or not you think all European banks are bust.

  • rate this
    -1

    Comment number 44.

    Simple question: when you drive on the motorway, do you obey the speed limit or do you bend the rules by driving as fast as you think you can get away with? If you do drive at 70mph, how many people do you see passing you at 75-80mph? Now, why is anyone surprised that companies also bend the rules and do as much as they think they can get away with?

  • rate this
    +12

    Comment number 43.

    Hmmm. In the 90s a firm called Bankers Trust had a string of scandals where its clients lost hundreds of millions of dollars of exotic derivatives deals. It was generally agreed the culture was rotten there.

    Jerry del Missier worked in Bankers Trust's derivatives group back then.

    Plus ca change...
    Maybe there's some more digging to be done?

  • rate this
    +19

    Comment number 42.

    It seems to me that when corruption is identified as affecting the top political and business classes (as in the Operation Countryman enquiry all those years ago) a large carpet is “rolled out” under which things can be swept.

    This needs looking at by the Judiciary, not Politicians.

  • rate this
    0

    Comment number 41.

    Old military message joke (but very prescient): -
    General at the Front to HQ
    "Send reinforcements, we're going to advance"
    Received at HQ
    "Send three (shillings) and fourpence, we'r going to a dancve"

  • rate this
    +2

    Comment number 40.

    @niel crammond. Niel, Most people will no longer believe there are "honest traders". The scandals of the last years have branded you all as nothing better than grossly overpaid shysters. You seem not to have grasped that. There is a way out of this mess: pass a law that directors and senior executives have unlimited personal liability for losses or misdeeds of the bank they are supposed to run.

  • rate this
    +1

    Comment number 39.

    A culture that pushes the limits will make stuff up as they go along. For instance Libor is a mathematically flawed concept. The way it's been calculated is like asking 'What's the average of pi?' It's meaningless. Whole industry needs an overhaul to get back to the real world.

  • rate this
    +2

    Comment number 38.

    just looked at my blogs back to 2008 and how much as come true in what I said is beyond beleaf

    http://www.bbc.co.uk/blogs/profile.shtml?userid=13655761

  • rate this
    +2

    Comment number 37.

    FSA were very aware of rule breaking and I am afraid they must share the blame . As traders we have been screaming about manipulation and market abuse and the cost to the honest trader has been huge . Sorry but this time the guilty have to pay and be suspended .

  • rate this
    +1

    Comment number 36.

    29. Richard Morris

    -----
    Are you fishing for applause?
    --
    No, No, No, It is plausible to think that Barclay's were fined when they settled.
    It is plausible for Mr Diamond to think that Barclay's paid 20 billion in taxes.
    It is plausible to think Mr Diamond knew nothing of Libor fixing and escape prosecution.
    Or perhaps I'm just paulsible.

  • Comment number 35.

    All this user's posts have been removed.Why?

  • rate this
    +10

    Comment number 34.

    He said she said he said

    Asset strip the lot of them then lock m up
    o

  • rate this
    +3

    Comment number 33.

    It's all unravelling fast. Now that these characters are facing the world, each will begin to chirrup more and more. Hopefully soon we'll get to have a whole chorus of totally in tune canaries all singing from the same hymn sheet. A song that sings about the unbridled TRUTH!

  • Comment number 32.

    All this user's posts have been removed.Why?

  • rate this
    +2

    Comment number 31.

    One of the major problems in Banking and Industries, is that everyone is put under pressure to achieve results which are set by TARGETS, mostly unattainable. Whether it is for that bonus or to satisfy shareholders, many people will do whatever it takes to obtain these results. Targets are required but not at any cost and those who act improperly or illegally should be dealt with accordingly.
    ASH

 

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