How Barclays got the wrong end of the stick

One of the disturbing things about the Libor interest rate-fixing scandal is how frequently apparently intelligent people in functions of vital importance have been capable of misinterpreting what other similarly intelligent people have said to them. But it's hard to see how anyone could get the wrong end of the stick from the letter Lord Turner, the chairman of the Financial Services Authority, wrote to Barclays chairman Marcus Agius in April.

It was published by the Treasury Select Committee to coincide with Mr Agius' appearance before it yesterday. And in it Lord Turner's language is as blunt as a mallet applied to the head. With force.

He accused Barclays of spinning messages in an unhelpful fashion when stress tests were being conducted, of using up the regulator's resources and goodwill and causing unnecessary friction while burdening the watchdog's internal processes. Ouch.

One might think that a bank's chairman would be a trifle concerned about correspondence using such terms, particularly given that it came from the chairman of his regulator; that he might call in his colleagues for a lengthy and detailed discussion on how to deal with it.

And yet, according to Mr Agius, the letter resulted in perhaps 20, perhaps 30 minutes of discussion.

If Lord Turner had intended for his mallet to crack heads, it clearly wasn't powerful enough. How else, one might wonder, could the former Barclays chief executive, Bob Diamond, have been left with the impression that relations with the regulator were generally cordial. Which was certainly the impression he gave evidence to the Treasury Select Committee last week.

It now looks like he will be asked to return for a repeat visit to explain further, perhaps as soon as next week. Perhaps he'll sparkle a little more brightly rather than blocking everything sent in his direction. He asked for a "little love" during his previous testimony. There isn't a lot of that left among committee members.

However, as is often the case, there was a sting in the tail of what has been one of the more revealing episode in the affair, at least up until now.

Lord Turner's letter and Barclays' response to it, would appear to suggest that questions ought to be raised about the bank's governance.

And yet, when asked whether the FSA had raised this very issue with him, Mr Agius said he had been told by a specialist in the area from the regulator that she had no worries. That, in fact, she was thoroughly impressed with Barclays and that the bank stood out as best in breed.

If that is the case, what on earth does it say about the other big British banks whose governance apparently leaves something to be desired.

If Lord Turner had intended his mallet to crack heads, it clearly wasn't powerful enough