FSA warned Barclays over 'unsuitability' of Bob Diamond

 

The City watchdog warned Barclays two years ago that appointing Bob Diamond as chief executive could prove unsuitable, documents revealed today.

Hector Sants, the then head of the Financial Services Authority (FSA), told former Barclays chairman Marcus Agius that the regulator agreed to Mr Diamond's appointment on the grounds that a Libor-rigging investigation had no "adverse effect".

But Mr Sants emphasised that the investigation was ongoing and could change the FSA's position, according to a file note released by the Treasury Select Committee.

Mr Diamond resigned amid intense political and public pressure after Barclays was fined £290 million by UK and US regulators for manipulating the Libor, a key interbank lending rate.

Mr Sants met Mr Agius on September 15, 2010, to confirm the FSA's approval of Mr Diamond's appointment but with some issues it expected the Barclays board to address.

He raised concerns over Mr Diamond's relationship with the regulator, the filenote said, and added that he had "not reached the level of openness, transparency and willingness" seen in his predecessor John Varley.

Mr Varley planned to "coach" Mr Diamond in his remaining six months.

Mr Agius reportedly said Mr Diamond was "very competitive and lost out in the previous chief executive selection" but will "mature and relax" given he achieved his goal.

In a letter sent to committee chairman Andrew Tyrie MP on August 20 this year, Mr Sants said: "The FSA was fully aware that the ongoing investigation might come to conclusions which would be relevant to Mr Diamond's suitability.

"However, at the time, since the investigation was not concluded, it would not have been appropriate to prejudge its outcome."

Referring to the meeting with Mr Agius, Mr Sants added: "I specifically made clear that we reserved the right to re-assess his (Mr Diamond) suitability in the light of the conclusions reached by this investigation and requested he make this clear to Mr Diamond.

"Secondly, I would like to record that in that conversation, I made clear that our concerns about Barclays' culture were not some generic observation but specific to Barclays, and asked that these concerns be communicated by Mr Agius to Mr Diamond. Mr Agius confirmed that he would do this."

Mr Diamond gave evidence to the committee in the wake of the revelations over the fixing of Libor.

The American banker blamed a "series of unfortunate events" for his shock departure but denied he was "personally culpable" for the actions of traders at his bank.

Mrs Justice Gloster formed a different view of Mr Berezovsky.

"On my analysis of the entirety of the evidence, I found Mr Berezovsky an unimpressive, and inherently unreliable, witness, who regarded truth as a transitory, flexible concept, which could be moulded to suit his current purposes," said the judge.

"At times, the evidence which he gave was deliberately dishonest; sometimes he was clearly making his evidence up as he went along in response to the perceived difficulty in answering the questions in a manner consistent with his case; at other times, I gained the impression that he was not necessarily being deliberately dishonest, but had deluded himself into believing his own version of events.

"On occasions he tried to avoid answering questions by making long and irrelevant speeches, or by professing to have forgotten facts which he had been happy to record in his pleadings or witness statements.

"He embroidered and supplemented statements in his witness statements, or directly contradicted them. He departed from his own previous oral evidence, sometimes within minutes of having given it.

"When the evidence presented problems, Mr Berezovsky simply changed his case so as to dovetail it in with the new facts, as best he could.

"He repeatedly sought to distance himself from statements in pleadings and in witness statements which he had signed or approved, blaming the 'interpretation' of his lawyers, as if this somehow diminished his personal responsibility for accounts of the facts, which must have been derived from him and which he had verified as his own."

The judge said Mr Berezovsky's claims relating to oil firm Sibneft and aluminium firm RusAl were heavily dependent on his "oral evidence".

"Because both the Sibneft and the RusAl claims depended so very heavily on the oral evidence of Mr Berezovsky, the court needed to have a high degree of confidence in the quality of his evidence," she said.

"That meant confidence not only in his ability to recollect things accurately, but also in his objectivity and truthfulness as a witness."

Mrs Justice Gloster said Mr Berezovsky, who gave evidence in English, had been "assured and confident" and "unfailingly courteous".

And she thought he might have enjoyed "fencing" with the barrister leading Mr Abramovich's legal team - Jonathan Sumption QC, who is now a Supreme Court judge.

"Mr Berezovsky spoke excellent English," said the judge.

"He gave his evidence in an assured and confident manner and had little, if any difficulty, in understanding the questions put to him in cross-examination by Mr Sumption.

"Indeed he gave the impression, if not of precisely enjoying the experience, at least of relishing the opportunity to present his story to the court and a large audience, and to fence with Mr Sumption.

"However, I have little doubt that he found the experience a stressful one."

PA

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