Barclays' value plummets £4bn as shareholders flee

 

More than £4bn was wiped from the value of Barclays yesterday as shareholders fled the bank in the wake of its £290m fines for trying to fix interest rates. The spectacular sell-off left Barclays as the biggest faller on the London Stock Exchange and led to calls for a "change in leadership" at the beleaguered bank, whose shareholders are already furious over multimillion-pound bonuses granted to chief executive Bob Diamond and his colleagues despite missing his own profitability targets.

In a letter to Andrew Tyrie, the MP who is the chairman of the Commons Treasury Select Committee, Mr Diamond last night accepted the fact that Barclays "did not meet the high standards that we set for ourselves". Nevertheless, he insisted that in the case of individual traders attempting to influence the bank's Libor submissions, "inappropriate conduct was limited to a small number of people" who were "operating purely for their own benefit" rather than on the bank's behalf. He added that "the authorities found no evidence that anyone more senior than the immediate desk supervisors was aware" of improper requests to manipulate rates.

As for the separate matter of Barclays reducing its rates "to protect the reputation of the bank from negative speculation" about its liquidity, he said he accepted that "the decision to lower submissions was wrong," while hinting it was taken because of suspicions "about the integrity" of Libor.

Regulators are actively pursuing individuals, with at least 20 banks under investigation, and are liaising with the Serious Fraud Office. This could lead to criminal charges while the Financial Services Authority is considering fining bankers and banning them from the City.

RBS could be next in line to be fined, according to The Times, which reported that it was set for a £150m penalty. RBS refused to comment, though a source said the figure appeared to merely be "speculative".

Yesterday's bank sell-off also hit the Royal Bank of Scotland, Lloyds Banking Group and HSBC. They said they were "co-operating with regulators". RBS shares fell by 11.4 per cent (£3bn of the bank's value), Lloyds by 4 per cent (£900m) and HSBC by 2.6 per cent (£2.6bn), compared with Barclays' 15.5 per cent tumble.

As part of the civil settlement agreed with Barclays this week, the bank is required to continue fully co-operating with a criminal investigation by the Department of Justice in the US, which could lead to some traders battling extradition.

In almost 100 pages of devastating evidence from regulators in the US and UK, released on Wednesday, no individual Barclays trader or manager is cited by name and the bank refused to detail which, or even how many, employees had been disciplined since the abuses came to light. The reason the bank gave is that it does not want to prejudice potential criminal or civil proceedings.

Penalties of up to 10 years in prison are possible under the UK Fraud Act, according to Alexander Fox, head of litigation at the London law firm Manches. Prosecutors will need to prove not only that traders tried to influence the Libor rate, but that they were successful in doing so and profited from that success.

The share sell-off was prompted as much by the fear over the cost of civil lawsuits as it was the fines. Sandy Chen, banking analyst at Cenkos, warned clients that they would "dwarf" the £290m cost of the fines.

Meanwhile, Michelmores partner and former SFO prosecutor Andrew Oldland, QC, said: "Although the initial response to the FSA's fine has come as a shock to most observers – if anything the penalties are too lenient. Barclay's decision to settle with the FSA could just be the tip of the iceberg."

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