Barclays looks set to be hit by a consumer backlash after Leicester city council said it had withdrawn more than £6m worth of deposits in protest over the bank manipulating the Libor rate.
The Midlands council is the first investor to take out more than a seven figure sum with analysts expecting further high profile withdraws as anger over the scandal grows.
Rory Palmer, the deputy mayor of Leicester city council, said he had become “uncomfortable” about doing business with the high street bank following revelations that some of its employees were fixing the inter-bank lending rate. “I have been appalled by what Barclays did and we'll not be investing our money with them,” he told the Leicester Mercury newspaper.“I think the people of Leicester would share that discomfort, so we are taking steps to end our association with Barclays.”
Mr Palmer added that it would take “a couple of weeks” before the council could fully withdraw all its money. “The money will be put into other banks,” he said. “We have a financial responsibility to invest taxpayers’ money wisely and there is also a moral responsibility.”
Finding a suitable replacement bank will be no easy task given that it is widely believed a number of other banks were also involved in Libor rate fixing. With investigations now taking place on both sides of the Atlantic banks such as Citigroup, JPMorgan Chase, HSBC and Deutsche Bank have all admitted they are now being examined for interest rate manipulation.
Despite the recent resignation of Barclays chief Bob Diamond, the bank faces an uphill struggle to clean up its image. It has already faced a series of protests in recent weeks over Libor rigging, with members of campaigners Move Your Money UK urging customers to withdraw their savings from the bank.
The latest blow to Barclays comes as speculation mounts over the future make-up of its board, with deputy chairman Sir Michael Rake and co-head of corporate and investment banking Rich Ricci in the running for chairman and chief executive respectively. Sir Michael, who was promoted from senior independent director to deputy chairman amid the rate-rigging furore, is believed to be sounding out Barclays investors about becoming chairman.
He is already said to have told shareholders he is ready to step down from the boards of airline easyJet and BT to secure the chairmanship.