Former Barclays COO Jerry del Missier gives Libor evidence to the Treasury Select Committee
16.42: Jerry del Missier is looking nervous. This is not his natural arena. He is an operations man, a lieutenant, as opposed to a front man so this is understandable.
But what he is saying is potentially explosive, particularly on Barclays’ Libor interest rate submissions after the now infamous conversation between Bob Diamond, the former Barclays chief executive and his boss, and Paul Tucker, deputy governor of the Bank of England.
The note of that conversation made by Mr Diamond has been published and appeared to show Mr Tucker indicating that Barclays should lower its Libor submissions.
Mr Diamond said he didn’t take that view from it but Mr del Missier’s interpretation was different.
This is what Mr del Missier said on the matter: “Mr Diamond and I had had a conversation a day before (the note was circulated) about the phone call. I don’t know why he copied me in (on the note). I took the action on the basis of the phone call. He (Diamond) said he had had a conversation with Mr Tucker at the Bank of England. (He said) The Bank of England was getting pressure from Whitehall about he health of Barclays and that we should get our Libor rates down. That we shouldn’t be outliers.”
There’s more: “I passed the instruction as I had received it on to the money markets desk. I relayed the contents of the conversation I had had with Mr Diamond and expected the Bank of England’s views would be incorporated into Libor submissions.
I expected that they would take those views into account. Given that Barclays was submitting high (Libor) rates I would have expected that taking that into account.”
He said he didn’t subsequently discuss the matter with Mr Diamond.
This is the first we heard of this conversation. And Mr del Missier said he “passed the instruction down”. Whose instruction? That of the Bank of England or Mr Diamond.
Mr del Missier went on to say that it was an instruction from Mr Diamond.
This is heating up nicely.
Mr del Missier said he did not consider what he did to be improper despite the MPs pointing out that the US Department of Justice considered it to be, well, illegal. Not just improper but illegal.
In retrospect he says he can’t disagree with the DoJ (as well he might, the DoJ is now know for taking prisoners): “This report (the DoJ’s) covered a number of different actions.
“I wasn’t on the call with Mr Tucker and Mr Diamond but I know that all the Tripartite authorities (The Treasury, the FSA, the Bank of England) were working closely together,” said Mr del Missier.
He took the instruction because he believed it was coming from the outside. Otherwise he wouldn’t have done it.
From what I’m hearing so far Mr Diamond and the Bank of England both have some serious questions to answer, at the very least.
Asked about Mr Diamond’s belief that Mr del Missier misunderstood the conversation he said: “I can only state my recollection of the conversation. What was communicated to me by Mr Diamond was there was political pressure... and we should get our Libor rates down.
There is nothing in the note that conflicts with that interpretation.
Ivan Fallon said the note did not appear to be an instruction, as such. Mr del Missier’s responce: “I acted on the basis of the phone conversation.”
Had he taken legal advice, Mr Fallon asked: “No.”
Andrew Tyrie, the committee chairman, has asked if he regretted not following up on the conversation. Mr del Missier says in retrospect he would have followed it up. I’ll bet.
He says he can only now give his recollection of the conversation.
16.53: Who knew what when is rather important to this case but also rather hazy. According to Mr del Missier he knew of the Libor investigation - “a very public investigaion” - back in 2008. Mr Diamond, however, said he didn’t know about it until much latter.
Mr del Missier, by contast, said he wasn’t aware of pressure on Barclays to get back in the Libor pack back in 2007. Mr Diamond apparently was. Sound confusing? It surely is.
16.59: Here’s what is clear. Mr del Missier’s instruction to the moneymarket desk at Barclays - in effect to lowball Libor - only lasted “days if at all” according to Mr del Missier. That is because afterwards Central banks intervened in the markets with masses of cash causing banks’ funding costs to plunge (and Libor along with this).
But the DoJ said Barclays’ lowballing of Libor submissions went on until May 2009. Mr del Missier said he was not aware of the specifics (of what the moneymarket desk was dpoing).
Andrew Tyrie, committee chairman, queries whether Barclays moneymarket desk would tell the committee that they felt justified in lowballing rates until 2009 as a result of his instruction.
Mr del Missier said he wasn’t aware of it (again). Mr Tyrie described this as “implausible”. In other words, he was saying: Are these executives seriously telling us that they do not know what’s going on in their own bank? It seems that they are.
17.37: This is fascinating. We have been told that either Mark Deerlove, the top man on Barclays’ money market desk, or someone on the desk, informed Barclays compliance of the instruction to manipulate Libor lower from Mr del Missier.
But the compliance department did not then get back in touch with Mr del Missier to ask him about it. This is despite the fact that compliance was apparently worried about the attempted Libor fixing that had been going on for months and years previously. According to Mr del Missier: “The circle was not closed.”
It does rather make you wonder just how these banks are being managed. People like Mr del Missier get paid millions and yet say they didn’t know what was going on under their noses.
Andrew Tyrie, committee chairman, pointed out that a lot of requests from external traders to Barclays to manipulate Libor came from traders who had previously worked for Barclays. What does this say about Barclays’ culture, he asked. Mr del Missier spoke of his regret about what has happened. We’ve heard that before.
So there you have it. This has been perhaps the most interesting - and eye opening - of these sessions we have yet seen. There are one or two Barclays, or former Barclays, employees who might now be feeling a little worried. Such as Mr Deerlove and the head of Barclays compliance department. Because they might be next to appear before MPs.
What we need to know was how on earth did a situation apparently arise in which these people didn’t appear to feel the need to inform their bosses about what was going on. Or, to quote Mr del Missier, didn’t see the need to close the circle.
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