Business

Barclays to review 'flawed' practices as Agius resigns

  • 2 July 2012
  • From the section Business
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Barclays has promised a "root and branch review" of its business practices and announced the resignation of its chairman Marcus Agius.

This follows Barclays' attempts to manipulate inter-bank lending rates, for which it was fined £290m ($450m).

In a statement, Mr Agius said: "The buck stops with me."

The government is expected to announce a wider inquiry into banking later, in addition to the inquiry of the abuses of Libor rates already announced.

Chancellor George Osborne is expected to announce more details of the wider inquiry when he makes a statement to the House of Commons at about 1630BST.

The new inquiry will not, however, be a full public inquiry like the Leveson Inquiry into press standards, which Labour has asked for.

Leader of the opposition, Ed Miliband, said criminal charges should be brought against those involved in the rate-fixing scandal and called for the resignation of Barclays chief executive Bob Diamond.

He said it was really important to restore trust in British banks. "I really don't think that can be done by Bob Diamond," he said.

Former Barclays director Baroness Wheatcroft told BBC News that the chairman was currently "carrying the can" and said Mr Diamond's resignation was now "inevitable".

Blow to reputation

Mr Diamond will appear before MPs on the Treasury Committee on Wednesday, followed by Mr Agius on Thursday.

Mr Agius has also stepped down as chairman of the British Bankers' Association, which is responsible for compiling Libor.

Mr Agius, who also serves on the BBC's executive board, said last week's events were evidence of "unacceptable standards of behaviour within the bank".

He said the findings had "dealt a devastating blow" to Barclays' reputation.

Barclays' board has launched an audit of its business practices, which will be conducted by an independent body and report to the new deputy chairman, Sir Michael Rake.

The bank promised:

  • a "root and branch review" of its "flawed" past practices
  • a public report of the audit's findings
  • a new mandatory code of conduct for all staff

Barclays will establish a "zero tolerance policy" to anything that damages its reputation, the bank said in the statement.

Sir Michael Rake, BT chairman and senior independent director at Barclays, has been appointed deputy chairman at the bank. He is seen as a likely successor to Mr Agius.

Mr Agius will stay on as chairman while Sir John Sunderland, a non-executive director of Barclays, looks for his replacement.

Different culture

Barclays was fined after the Financial Services Authority (FSA) found its traders had lied about the interest rate other banks were charging it for loans. Investigations are also under way at RBS, HSBC, Citigroup and UBS.

Giving a lower reading than the true rate would give the impression that Barclays was considered a better lending risk than it actually was.

Reporting a higher reading than the real rate could have inflated trading profits artificially, misleading investors and regulators.

The FSA found evidence that Barclays, sometimes working with staff at other banks, had tried to manipulate Libor (the London Inter Bank Offered Rate) and its European equivalent Euribor between 2005 and 2009.

Bob Diamond said Mr Agius' decision "deserves all of our respect" and paid tribute to Mr Agius' six years as chairman: "He has been a thoughtful and supportive colleague to me in all of my roles - especially since I became chief executive last year."

But the BBC's business editor said some shareholders thought Mr Agius had failed to stand up to Mr Diamond, who was regarded as very talented but also very headstrong.

Earlier this year, Mr Agius was criticised for backing a £17.7m pay deal for Mr Diamond. A number of shareholders voted against the remuneration package.

Mr Diamond welcomed plans for an independent audit: "I am committed to ensuring that the recommendations from this review are implemented in full."

He also promised to "continue to build a culture that all of those with a stake in Barclays can be proud of".