Barclays credit rating outlook cut by Moody's and S&P

Barclays protestor Moody's said shareholders and politicians could push Barclays away from investment banking

Rating agencies Moody's and Standard and Poor's have lowered their outlook on Barclays from stable to negative amid the bank rate-rigging scandal.

Moody's said shareholder and political pressure was creating uncertainty about the bank's future.

S&P said the emergence of "weak business practices" had hit the company's prospects.

The move comes a day after ex-Barclays chief executive Bob Diamond told MPs the rate fixing was "reprehensible".

One MP, however, called some of Mr Diamond's evidence "implausible".

On Thursday, MPs rejected Labour's request for a judge-led inquiry, in favour of a parliamentary one proposed by ministers.

Moody's said pressure on the bank could force it to move away from investment banking.

"Although this could have potentially positive implications over the longer term, the uncertainty surrounding such a change in direction is credit negative in the short term," the agency said.

It added that Barclays may find it difficult to replace Mr Diamond, chief operating officer Jerry del Missier, and chairman Marcus Agius, all of whom resigned this week. Mr Agius is staying on at the bank to oversee finding a replacement for Mr Diamond, but will step down once someone has been found.

S&P said "weak compliance" and "current management flux" had knocked the company's outlook.

'Physically ill'

Bob Diamond: "When I read the e-mails from those traders I got physically ill"

Mr Diamond underwent a three-hour grilling by MPs on Wednesday, some of whom expressed surprise at some of his evidence.

Andrew Tyrie, chairman of the Treasury Committee, said some of what the banker said seemed "implausible", while another committee member, David Ruffley, said he was not satisfied with Mr Diamond's explanation.

Mr Diamond said he had only learned the true extent of the scandal in the past month, and that he had felt "physically ill" when reading incriminating emails from traders that they had conspired to manipulate the Libor rate - the interest rate at which banks lend to one another and which is used to set lending rates across the economy.

Mr Diamond said he "loved" Barclays and had resigned on Tuesday to protect its reputation. "I'm sorry, disappointed and angry," he said.

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But Mr Tyrie, who has been asked to lead a parliamentary inquiry into banking following the scandal, was sceptical about some of what he heard.

He told the BBC after the hearing: "We learnt that Bob Diamond says he didn't know anything about this until about a month ago, which I find rather surprising.

"I think, cumulatively, the whole package looks somewhat implausible. And if it is plausible, it's only because there is something wrong with the culture of Barclays and, of course, it's the culture that needs to be put right."

In a separate BBC interview, committee member David Ruffley said: "Either [Mr Diamond] was complicit or, frankly, incompetent."

Misunderstanding

Paul Tucker, the Bank of England's deputy governor, will give evidence to the committee next week.

Richard Hunter, of Hargreaves Lansdown: "Ratings agencies tend to err on side of caution"

Mr Diamond said that, during a telephone conversation in October 2008, Mr Tucker told him "senior figures within Whitehall" were concerned about why Barclays was setting its Libor rate higher than some other major banks.

Subsequently, the Libor borrowing rates submitted by Barclays fell, potentially understating the extent of the bank's borrowing costs.

Mr Diamond maintains that he did not view his conversation with Mr Tucker as an instruction to change the bank's rates submissions.

However, he said his chief operating officer Jerry del Missier, who also resigned on Tuesday, misunderstood the message from the Bank, and directed traders to take actions to lower Barclays' Libor rates.

The Financial Services Authority has investigated Mr del Missier's actions, and will take no further action.

Banks borrow from each other daily, and report at what rate they got the money. A high rate can indicate a bank is having trouble borrowing money because it is in financial trouble.

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