James Moore: A bank tale stranger than fiction, but we need the truth now
This affair has briefly eclipsed the eurozone crisis, but the latter hasn’t gone away
Outlook For a bank of the size and stature of Barclays to conduct itself in the manner of a bad plot from Dallas is really quite astonishing. Yet that is exactly what has been happening.
After a brief attempt to tough it out following fines totalling £290m as a result of its traders' attempts to manipulate Libor interest rates, Barclays chairman Marcus Agius resigned, saying that the buck "stops with me" when in fact it should have stopped with Bob Diamond, chief executive, and his first lieutenant Jerry del Missier.
Mr Diamond and Mr del Missier were the men who built Barclays Capital, now Barclays Investment Bank, into a top-tier example of the breed. They were also the men who presided over a culture that allowed traders to feel they could attempt play fast and loose with Libor regardless of the consequences to the bank's clients.
So, finally, Messrs Diamond and del Missier did the right thing and resigned yesterday. But the circumstances behind those resignations remain anything but clear and the intrigue surrounding the affair gets thicker by the hour.
What we do know is that, having attempted to make their views plain about what Barclays needed to do at the Bank of England's press conference accompanying its financial stability report last week, Lord Turner, the chairman of the Financial Services Authority, and Sir Mervyn King, governor of the Bank of England, were ignored.
Apparently it was only following several calls from Sir Mervyn and Lord Turner that the men who should have gone in the first place agreed to walk the plank following a 48-hour timespan in which even someone like John Grisham might have felt there were too many twists and turns for a credible work of fiction.
And still the twists kept coming. Mr Agius, in his first press conference as Barclays new full-time executive chairman, his resignation date seemingly put back indefinitely, flatly denied that Mr Diamond or Mr del Missier had acted as a result of any pressure from the regulatory authorities — or from himself or his fellow board members. Instead, he said, they had both independently arrived at the same conclusion.
As if that weren't enough, prior to the call, Barclays released a detailed submission before what looks set to be an explosive hearing at the Treasury Select Committee today. It is pure dynamite.
It explains that Mr del Missier concluded from the note of a conversation between Mr Diamond and Paul Tucker, deputy governor of the Bank of England, that an instruction had been passed down to Barclays to ensure that its submissions for the calculation of Libor, based on what banks pay to borrow from each other, were lower than it was actually paying. That the Bank had told it to cook the books.
It isn't hard to see why given that Mr Diamond quoted Mr Tucker as saying that senior figures in Whitehall and Westminster were very concerned about Barclays submitting high figures for what it was having to pay to borrow.
And that Barclays "didn't always need to be" at the top, which could have created the impression in the market that the bank had a problem.
If the note is an accurate record of the call, and there is no reason for believing that it is not, it is rather easy to see how it could be interpreted in the way Mr del Missier did. If not as an instruction, then certainly a very strong hint.
Mr Tucker appears to have some serious questions to answer at the very least, although Barclays itself contradicts this impression by saying that Mr Diamond didn't see it that way. The note certainly doesn't exonerate Mr Diamond or, for that matter, Mr del Missier. Those emails published by the regulators speak of a deep-seated problem with the culture at the bank. In Barclays, Britain has its own version of Goldman Sachs, and it isn't a pretty sight.
Alll the same, there are now two very different narratives about how at least part of the Libor scandal came to be, and how Mr Diamond and Mr del Missier paid for it.
That being the case, the Bank of England and perhaps the Financial Services Authority may very quickly be in receipt of some fallout of their own — especially if similar notes emerge when other banks are brought to book for their role in this shabby episode.
Is it worth, now, pointing out the backdrop to this astonishing affair. It has briefly eclipsed the Eurozone crisis, but that the latter hasn't gone away. If only.
Set against that, we have a systemically important global bank whose board appears to be out of touch at best, and at worst eyeless in Gaza.
Arguably even more dangerous, it appears that effective communication, and perhaps the relationship, between Barclays and its regulators has broken down. The blame for that cannot entirely be placed at Barclays' door. For such a situation to occur, there is usually fault on both sides.
As such, the strange conversation between Mr Diamond and Mr Tucker about Libor, and the way it was misinterpreted and disseminated around Barclays, could be a metaphor for a much wider problem.
If the two sides are speaking to each other, it isn't entirely clear that they are speaking in a language that both understand. That situation has to be addressed as a matter of priority.
In the meantime, Mr Diamond will bow out in public at the hearing, with scant motivation now to spare the Bank of England's blushes.
The truth of the matter needs to come out, so MPs have to resist the temptation for grandstanding. Now is not the time to beat up Bob. Now is the time for answers.
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