Diamond's not forever... as he'll soon discover

The Barclays chief executive whose name has now become a lightning rod for every failure of banking in Britain will have to resign, writes James Moore. He just doesn't know it yet

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The Independent Online

If you look at Canary Wharf from the right distance on a sunny day you can see the steam pouring from the top of some of the taller buildings in London's Docklands. Is it my imagination or is there more venting forth from Barclays' HQ than from any of the others?

Three days after the bank was ordered to pay £290m in fines as a result of its traders attempting to fix Libor interest rates for their own advantage, it is only getting hotter for its chief executive, Bob Diamond.

Worryingly for Barclays, support among shareholders appears to be ebbing away – at least the ones I have talked to.

They are now openly questioning whether there needs to be a change of leadership at the top of the bank. Sir Michael Rake, the senior independent director, and Marcus Agius, the chairman, are not going to enjoy an easy time as they tour City fund managers over the next few days.

They thought they were going to mollify aggrieved investors over the bank's shameful remuneration report that revealed executives were paid big bonuses for their work last year despite the bank admitting that its performance was moderate at best. That's now been overtaken by events. They will now be called upon to explain a toxic culture at the bank.

Attempting to fix an interest rate to benefit oneself regardless of the consequences to your customers and clients is exactly the sort of behaviour that has led to the banking industry being held in general contempt.

It has even managed to knock the problems caused by Royal Bank of Scotland's recent catastrophic IT failings off the front pages. Each time it seems as if things couldn't get any worse for the industry – that it has hit bottom – a new scandal emerges to illustrate that, if anything, we're only halfway down.

So it is time for Mr Diamond to listen to those shareholders who are calling for him to go. He may not be individually culpable for what went on. He may not have known exactly what was going on – although that raises the question, why not? It doesn't matter. He is now very much part of the problem.

Mr Diamond is a skilled executive. He built Barclays Capital into a world-class investment bank from the ashes of BZW when his bosses had basically given up on the business as a bad job.

Given the way investment banks have been operating, that is not exactly something to celebrate. But all the same, it is not easily done. Barclays Capital also contributes a disproportionate amount to Barclays' earnings.

Mr Diamond has promised that heads will roll. And that those involved will have their bonuses clawed back. He says he is determined to make Barclays a better "corporate citizen".

It still doesn't matter. Those words about "corporate citizenship" sound hollow now – an empty promise undermined by events.

Mr Diamond now is and will remain part of the problem, not the solution, as the stunning fall in Barclays shares demonstrates.

There is now a very real danger that the market will apply a "Diamond discount" to those shares and it threatens to get wider each time a new scandal breaks.

We probably haven't heard the end of those scandals either. Just as we are led to believe that things are inching back to normality something comes along to upset the apple cart again.

The question now is whether Mr Diamond realises this.

He spent seven years patiently – well, mostly patiently – waiting behind John Varley, a man whose own previously spotless reputation is now under threat, for his turn to come up. He loves the job and even though he still earns a ridiculous amount of money, he took a significant pay cut to get it.

It still doesn't matter. He has become a lightning rod in this country for all of the industry's many failings and Barclays will find itself facing attacks from all sides while he remains in post.

It might not be fair but every time Barclays mis-sells a mortgage, every times it lays people off, every time its IT gives someone a hard time, it is Mr Diamond whose name people will think of. It is him they will blame and it is his still-bloated salary they will resent. It is actually hard to see how Barclays can function effectively as a normal business against this backdrop.

Bob Diamond lives and breathes Barclays. I've met him. I've seen it in him.

But if he is truly focused on what is best not only for Barclays shareholders but for the business in the days ahead, he should step down now.

It will come as a bitter, bitter blow to him, but if he truly loves Barclays Mr Diamond should understand this.

The question is whether that is possible for him. And, if it isn't, then his board must recognise it and be strong enough to act.

In the dock: The list

Pension mis-selling An estimated 1.7 million workers were wrongly advised in the 1990s to move from workplace pensions to less generous private schemes. By 2002, the Financial Services Authority estimated the public had lost £11.8bn and disciplined 346 firms – but fined them just £10m.

Endowment mis-selling Tempted by fat commissions financial advisers, offloaded endowment mortgages. to unwitting members of the public. In theory, the long-term savings plans repaid a home loan at end of the term, but they often fell short, leaving homeowners with a nasty surprise and years of extra payments.

Excessive bank charges Banks began raising penalty fees for unauthorised overdrafts in the middle of the past decade, charging up to £38 a time. Hundreds of thousands of customers won refunds from the banks before the British Bankers' Association won a test case in 2009. Nonetheless, amid a storm of disapproval, they cut the fees.

PPI mis-selling During the 2000s, the banking industry offloaded millions of dubious insurance policies to cover borrowers if they lost their jobs. Payment protection insurance (PPI) was poor value, riddled with exemptions and sometimes slyly slipped into loans without the borrower's knowledge. Banks have paid back £1.9bn but the final bill could reach £8bn.