Barclays boss Bob Diamond resigns amid Libor scandal

 
Bob Diamond Bob Diamond's severance package has not yet been decided, Barclays says

Barclays chief executive Bob Diamond has resigned a week after the bank was fined a record amount for trying to manipulate inter-bank lending rates.

BBC business editor Robert Peston said he was encouraged to go by the heads of the Bank of England and the FSA.

Mr Diamond said he was stepping down because the external pressure on the bank risked "damaging the franchise".

Chief operating officer Jerry del Missier has also resigned, the third top executive in two days to do so.

Barclays chairman Marcus Agius, who had announced his own resignation on Monday, will now take over the running of Barclays until a new chief executive is appointed.

'Cynical greed'

BBC business editor Robert Peston said the heads of the City's two main regulators had been unable to force Mr Diamond out "because the recent FSA investigation into how Barclays attempted to rig the important Libor interest rates did not find him personally culpable".

Start Quote

It is a soap opera like no other I can remember in my 30 years of reporting on the City”

End Quote

"However, as a regulated institution, it was impossible for Barclays' board to ignore the revealed wishes of the two most powerful regulators in the City."

Earlier, Lord Turner, the chairman of the Financial Services Authority, described the outrage that has built up over the bank's actions.

"The cynical greed of traders asking their colleagues to falsify their Libor submissions so that they could make bigger profits - has justifiably shocked and angered people, in particular when we are facing hard economic times provoked by the financial crisis," he told the Financial Services Authority's annual meeting.

Committee appearance

How Libor scandal developed

27 June: Barclays fined £290m by US and UK regulators for attempting to manipulate Libor rates

28 June: Barclays shares plunge 15%

29 June: Bank of England governor calls for change in banking culture

1 July: It emerges that RBS has sacked four traders over Libor and there are calls for changes in the law to cover Libor-rigging

2 July: Barclays chairman Marcus Agius resigns and the government launches two inquiries into Libor and banking standards

3 July: Barclays chief executive Bob Diamond resigns

Mr Diamond will still appear before MPs on the Treasury Committee on Wednesday to answer questions about the Libor affair.

"I look forward to fulfilling my obligation to contribute to the Treasury Committee's enquiries related to the settlements that Barclays announced last week without my leadership in question," Mr Diamond said in a statement.

He is expected to be questioned about a conversation he had with the deputy governor of the Bank of England, Paul Tucker, about Barclays' Libor submissions at the height of the credit crunch in 2008.

Barclays' managers came to believe, after the conversation between Mr Diamond and Mr Tucker, that the Bank of England had sanctioned them to lie about what they were paying to borrow when providing data to the committees that set the Libor rate.

Inquiry row

Chancellor George Osborne welcomed Mr Diamond's departure and said he hoped it was the "first step towards a new culture of responsibility" in banking.

Crisis jargon buster
Use the dropdown for easy-to-understand explanations of key financial terms:
AAA-rating
The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is minuscule.

"It is the right decision for the country," Mr Osborne said, saying the UK needed a strong Barclays concentrating on lending and contributing to economic recovery.

Labour leader Ed Miliband said it was "necessary and right" that Bob Diamond stepped down.

"But this is about much more than one individual, it's about the culture and practices of the banking industry," he said.

"That's why we need a full, judge-led, independent inquiry, to get to the bottom of those practices and make recommendations for change in the future. We've had missed opportunities before, we've got to seize this moment."

Labour is critical of the government's decision to call a parliamentary inquiry, chaired by the head of the Treasury Committee, Andrew Tyrie MP, rather than a full Leveson-style inquiry, independent of politicians.

Big pay-off?

Last week, regulators in the US and UK fined Barclays £290m ($450m) for attempting to rig Libor and Euribor, the interest rates at which banks lend to each other, which underpin trillions of pounds worth of financial transactions.

Start Quote

Libor is to banking what the Millie Dowler case was to phone hacking”

End Quote

Staff did this over a number of years, trying to raise them for profit and then, during the financial crisis, lowering them to hide the level to which Barclays was under financial stress.

Mr Diamond is one of the UK's highest paid chief executives, earning £20m last year, and was described as "the unacceptable face" of banking by the then business secretary Lord Mandelson in 2010.

The details of any severance package are not yet known, but former City minister Lord Myners suggests it could add up to £20m-£30m.

"I think his resignation letter is drafted with an eye to that [pay-off], because he admits no guilt on his part at all," the Labour peer told BBC News.

"The shareholders of Barclays will be expecting the board to ensure that not a penny more is paid to Bob Diamond than that to which he is legally entitled," he said.

US-born Mr Diamond was head of Barclays Capital, its investment bank division, when its staff were trying to manipulate the key inter-bank rates.

"He maintains that he didn't know what was going on," says Robert Peston.

Investigations are continuing in the UK and the US into other banks over Libor fixing, including criminal investigations by the Department of Justice. The Serious Fraud Office in the UK is looking into possible criminal prosecutions.

 

More on This Story

The BBC is not responsible for the content of external Internet sites

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    +75

    Comment number 846.

    I left Barclays after many years service because of a culture of 'win at all costs'. I am not surprised that was has transpired & the part of senior management in setting the tone of an organisation cannot be over-estimated.

  • rate this
    +77

    Comment number 843.

    As a Barclays pensioner we 'old style' bankers could see the problems looming. It started with payment for performance which became increasingly 'payment for profit at any cost'. Diamond was one of its keenest supporters and sent a cultural signal throught the organisation. Barclays must now find a new CEO and Chaiman and invoke the Vicker reports reccomendation as fast as it can - not in 2019

  • rate this
    +139

    Comment number 323.

    It's not just Barclay's reputation that's been harmed here, it's British banking as a whole. It is our biggest industry and makes us a financial powerhouse of the world and as such it is BRITAIN'S reputation that has/will be seriously dragged through the mud. We need to be proud of ourselves again and that means SERIOUS reform, root & branch NOT leaf and twig!

  • rate this
    +148

    Comment number 248.

    Even if his cheap comments about false impressions were true this man has no grounds to complain. Investment banking runs on the impression of the market and on assessments of risk so his job quite rightly goes on the same basis.
    I have no sympathy and considerable contempt for his arrogance,.

  • rate this
    +142

    Comment number 114.

    This hysteria about individuals and "bad culture" is a smokescreen for the fundamental problem. Money is an IOU. Banks create these IOUs, and take a cut each time such an IOU changes hands. But the IOU they create is not based upon anything real (goods or services). The power to create money should be returned to those that produce real things, so that money functions like a proper IOU.

 

Comments 5 of 8

 

More Business stories

RSS

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.