James Moore: Bob Diamond's evidence to parliament as it happened
James Moore is the Independent's Associate Business Editor and writes the Outlook City comment column from Tuesday to Friday. He also has a keen interest in disability issues and when not attempting to further injure himself playing wheelchair basketball.
Wednesday 04 July 2012
So Bob’s line: We are getting kicked because we went first and we co-operated. That has not come out in the court of public opinion. We’re also getting the “small group of traders” line. And he loves Barclays, of course. History, he says will “judge Barclays as an incredible institution”. Oh really?
Now we’re getting to the beef: was there pressure from the senior regulators on Bob to quit, asks Andrew Tyrie. He says he doesn’t know. So what, then, did the chairman (Marcus Agius) say to Bob about the sustainability of his continued role as CEO. He’s sticking to the line that it was his decision as a result of “the intensity of focus” on his leadership. Mr Tyrie wants to know why Bob is so reluctant to disclose what went on with the regulators. The Diamond demurs. He says conversations between Agius and the regulators are for Agius to talk about. And we’re back on how Barclays is getting it in the neck because it ‘fessed up. If this is how it’s going to go it won’t be the humdinger we’ve been led to believe.
Did the FSA express concerns in February, says Mr Tyrie? Bob says the FSA comes every year: “The context of the discussion when it got to controls (of Barclays), and focus and tone at the top, was something they were happy with. They talked to the board about Chris and I and our relations with the regulator.”
Tryie: “Didn’t they tell you trust had broken down, that they no longer had confidence in the senior exeuctive team. Wasn’t if followed up with a letter?”
Bob: “There was some concern about cultural issues. It was part of an annual review so there are always going to be some things they think we can do better. But they were pleased with the tone at the top.”
To hear this Bob is trying to portray the February meeting with regulators as some sort of love in.
Now we’re getting on to the note of the infamous contact with Paul Tucker that appeared to indicate the deputy governor suggested Barclays might like to lower its Libor interest rate submissions.
Tyrie wants to know how many of the contacts between Bob and the regulators were file noted. “The fact that you did this was very significant indeed.”
He wants to know what Mr Diamond understood by Mr Tucker mentioning “Whitehall” implying that it was “Whitehall” and not Tucker that wanted Barclays Libor submissions lowered..
Mr Diamond, after some preamble, felt this meant officials from the Government. Bingo.
Tyrie wants to know why Bob didn’t feel that Tucker’s suggestion that “Whitehall” felt Barclays submission “could be lower” in October 2008 wasn’t an instruction, as he stated in Barclays submission to the committee yesterday. We’re not really getting a clear answer. Other than Bob was very worried that Whitehall was worried that Barclays couldn’t fund itself and might react by forcing Barclays nationalisation. Barclays through that month was submitting higher rates than other banks, even those which had been nationalised. Bob is banging home on this point with one clear implication: “They were all at it.”
All the same, clear answers we aren’t really getting here.
It’s all been surprisingly civilised so far, but the committee’s headbangers are yet to get going.
Micheal Fallon, a non executive director of money broker Tullett Prebon, is up. He wants to know which officials Paul Tucker was referring to in his memos.
Were you shocked that senior Government officials wanted you to fiddle the Libor he asked? Bob says he was impressed Paul Tucker was trying to do his job, warning him about what was going on in Whitehall. His first reaction was to tell then CEO John Varley to hotfoot it over to speak to those officials to reassure them that Barclays could fund itself despite its high Libor submissions. “I was worried. (I said to Paul) Did you explain to ministers that other banks are posting levels blow us but which are not borrowing at those levels.
“We had banks with secret loans, that were being nationalised. There were clearly banks posting levels (of Libor) below us that didn’t seem to be right. This was a huge issue,” he says.
Fallon points out that Jerry del Missier (Diamond's number two) thought it was an instruction to lower Libor. He wants to know how del Missier misconstrued this when Bob did not. “Jerry has been very honest. There was a misunderstanding and he was the person that misconstructed. I was not aware of that. But we never moved into the submission territory (even after the note, Barclays was submitting a top four rate to Libor which is excluded from the calculation).”
We still haven't seen any smoking guns. Bob is playing this like Geoff Boycott rather than Ian Botham (even though he's an American he understands cricket, so might understand the reference).
Headbanger alert: it’s David Ruffley. He points out that the FSA said senior management’s “concerns over what other banks were doing” resulted in less senior management calling for Libor to be reduced. This was going on before the infamous Paul Tucker conversation. Can you tell me when this “low balling” going on. Bob says during the investigation by regulators into Libor. So its “I knew nothing” again. Ruffley’s getting cross now. He wants to know exactly when Bob knew what was going on. “This month,” says Bob. Ruffley wants to know why a ceo getting daily reports on Libor didn’t know what was going on. Bob again says Barclays was submitting high rates compared to other banks. Ruffley wants to know whether a criminal prosecution of a banker committing wrong doing or recklessness is a good idea. Bob first says its not a matter for him. Not good enough, as Ruffley points out. He wants Bob’s person view. Bob says: “I think people who do things they are not supposed to do should be dealt with harshly. When I got the results of this investigation, when I read the e-mails from those traders I got physically ill. It was reprehensible behaviour. It was wrong. I’m sorry, I’m disappointed. I’m angry. There is no excuse. I stand for a lot of people at Barclays that are really really angry about this. This is wrong. We put all the resources we could to make sure the people responsible were dealt with. This doesn’t represent the Barclays I know and I love and it doesn’t represent the work of 140,000 people. It was wrong.” Finally some passion.
Ruffley wants to know what Bob makes of the chancellor’s view that him quitting is “the right decision for the country”. Bob says: “I love Barclays. I’ve loved my time here. This is a great place to work.” So he doesn’t exactly answer.
George Mudie for Labour is up. Wants to know from Bob if he really feared that Alistair Darling was “running around looking for banks to nationalise”. “I didn’t feel that,” says Bob.
He says the traders “were acting for themselves” and didn’t have “any interest” in benefitting Barclays. Mudie is wanting to know about “phase one” of the attempted fixes, before the financial crisis, when lots of people could have lost out from what was going on. He wants to know how Bob was running such a firm in which “nobody felt the boss should know” about the activities of the traders who were openly playing fast and loose with Libor. Bob sticks to his line that it “first came to light during the investigation”. Mudie says that “the real worry is how you were running the firm”. It’s Bob Boycott again. Straight bat, I didn’t know.
Barclays now accused of inhabiting a “parallel” universe by Andrea Leadsom. Does he not understand how angry people feel? Good question. Bob? Straight bat. Behaviour appalling etc. “I can’t go back and change that. I understand there will be follow up criminal investigations (into some of the traders). That’s not up to us but we certainly not stand in the way of it.” She wants to know whose job it is to look out for evidence of criminal activity. Bob says its down to the bank’s compliance departments. He’s sure some of them sit in the dealing room. But they didn’t pick it up. “This did not get above the supervisor (of desk) level until we uncovered it. The second that it did, the investigation was all over it and the behaviour was stopped.” Would a supervisor have known manipulating Libor was an offence? “Yes,” says Bob. Where supervisors were aware (and sometimes they weren’t) they were dealt with. “We’re all impacted by these 14 traders. It is not OK. No one is saying that its ok.” Leadsom is hitting on the point about a culture that didn’t see the behaviour reported. She’s got a good point, but Bob’s still ducking and diving. It’s certainly clear that something was amiss at Barclays. But Bob won’t admit it.
Ah here’s a good one. Leadsom wants to know what steps taken to look at other possible nasty stuff elsewhere in the bank. Bob says its a regular part of the audit cycle. Wasn’t that the case with Libor, she asks. Bob finally says he has looked at other parts of the bank and whether they were misbehaving. “David and you have focussed on the culture, this is not to excuse the behaviour, it was abhorrent, but the rate setters, many of them have been here for 20 and 25 years. This wasn’t created recently. The second thing I would say is it was not perceived by the industry to be high risk. The risk of the area of rate setting exploded during the financial crisis.” Leadsom wants to go back to the culture before the crisis. She points out individuals are paid “to look after number one”. People get vast sums for their own books regardless of the banks, she says. Bob again backstops on the “no excuse” line. Please!
Andrew Love wants to know if there is a deep problem with our banking industry. Bob says: “The best thing we can do is recognise where problems were and learn from the mistakes.” Love wants to know if there is merit in an independent investigation. Bob: “There is a lot of regulation now and it has heightened tremendously since the crisis. We are trying to balance safe and sound banking with jobs and economic growth around the world.” Lots of banks have been saying this. But when they say jobs and economic growth the perception is often that it is their jobs and their economic growth in the form of bonuses.
So should Bob give up some of his bonus? “That’s certainly a question for the board,” he says. Cop out. Andrew Love is back on the case - the press says he’s been asked to give up his bonus. Bob says he doesn’t read the newspapers. Cop out (part 2). So, says Love, should there be recognition in the pay off of what went wrong? “Those are questions for the board. I have not asked them nor has that been that of interest to me since I resigned, my focus has been on preparing for today.” Cop out (part 3).
Mark Garnier says Bob Diamond “did a good job setting up Barclays Capital”. “Wow, you’re saying I did a good job. Just looking for some love here,” says Bob.
the he’s back on how “horrible” the regulators’ report into Libor fixing was. “As I got to some of the e-mails I got physical ill. The culture is opposite to anything we want. We are serious in Barclays that when people misbehave they have to leave. We missed it here.” No argument here.
Do you feel you were let down to the FSA and their guidance, Bob is asked.
Bob: “Im not going to pick out the FSA. There were multiple many month, many year conversations initiated by Barclays (with various regulators) that there were issues about this (Libor). We can’t sit here and say no-one new there was an issue. We can’t say this was a surprise. On multiple occasions Barclays visited with regulators to bring this to their attention. I’m not going to blame anyone else, the behaviour was our fault.”
Andrew Tyrie: “They were asleep at the wheel, though, weren’t they.”
“There wasn’t guidance in place.”
So they were asleep at the wheel. Come on Bob. We know Barclays mucked up. But why not say it more clearly. Andrew Tyrie is right.
Labour’s Teresa Pearce brings up Bob’s infamous quote - that the “period of remorse and apology for banks needs to be over”. It was made in Feb 2011. “It did not come across in the way I meant it or in a way that was positive,” says Bob. Really?
Would you like to restate it, asks Pearce. Bob: “Banks have to be better citizens. I was aware of the investigation. This is why citizenship was one of my four planks when I became chief executives. We have to be better citizens.” It took a long time, though, she says. “There will be a lot of people listening to this who won’t be shocked. Surely the culture shouldn’t be a surprise.”
Bob says he wouldn’t have allowed the bad behaviour had he been, presumably, directly responsible. “One of the reasons I thought it was appropriate to come here was Barclays. It is not indicative of these 14 people.”
“But it seems you have not even met Barclays much less love Barclays. You keep saying you weren’t aware.” Yes. Exactly.
Bob has admitted the evidence of culture is how people behave when no one is watching. No one was watching the Libor traders and Andrew Tyrie is worried this means there could be troubles elsewhere. Again he’s made a good point.
Headbanger alert 2: Labour’s John Mann. He kicks off by reminding Bob of the principles of the Quaker’s that founded Barclays, such as honesty and integrity and plain dealing. “You’re telling us you never questioned or analysed the (Libor) rates reported and you never discussed the possibility that they were misreported.”
Bob says he has always followed those principles. He says no one was aware of the problems when told he never asked. Bob isn’t rising to Mann’s bait yet.
Mann: “It appears strange that when people are asked to behave criminally (by fixing Libor) internally and externally that no one reports it.”
Again, it is difficult to argue with this line from the MPs. Barclays systems and controls were clearly deficient. Don’t people like Mr Diamond get paid such bloated packages to ensure that they are up to scratch?
Mann mentions Bob’s bonus. “Either you were complicit or you were grossly negligent or you were grossly incompetent. Thats the only conclusion.” Bob says this is the same question he’s been hearing all day. The one he’s not really provided a stunning answer to. Mann’s back on the bonus and the buck which stops with Bob. He wants to know if Bob will forfeit unvested shares. Bob says he doesn’t make that’s decision. Not true. He doesn’t have to take the cash.
Mann: “You’re accepting the good side, the bonuses. You’re the man in charge. Have you another suggestion (other than losing his job and bonuses) on how to show contrition. People are asking me whether they should take money out of ‘this thieving’ bank.”
Bob isn’t going to change. There wasn’t a personal culpability.
Mann says Diamond’s bonus for one year is equivalent to what Shelter needs to run for a year. If he gave the money up “then you might get a little love”. Bob still says Barclays management have done the responsible things.
Yes! The Lib Dems’ John Thurso has used the Boycott analogy.
Some heat now. Bob is insisting what happened "has to be seen in the context of what was going on". So there was a financial crisis, other people were being naughty. "I'm not excusing the behaviour," says Bob. So that's alright then.
Andrew Tyrie is wrapping up now. He describes the apparent lack of communication between Bob and Jerry del Missier as "extraordinary" given Mr del Missier interpreted the Bank of England memo ery differently to bob. He asks Bob if he's anything to add. Not really. Just more words. Hang on: "It is difficult for Barclays to be isolated on this. I know Barclays, if we have another situation like this we will come out and be first to correct this. But I worry about the impact of going first. The reaction doesn't create incentives for coming forward."
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