Twelve hours that shook the world of banking and beyond
On Monday night he seemed immovable. The next day he was gone. So what changed Bob Diamond's mind, asks Cahal Milmo
Cahal Milmo is the chief reporter of The Independent and has been with the paper since 2000. He was born in London and previously worked at the Press Association news agency. He has reported on assignment at home and abroad, including Rwanda, Sudan and Burkina Faso, the phone hacking scandal and the London Olympics. In his spare time he is a keen runner and cyclist, and keeps an allotment.
Wednesday 04 July 2012
When Bob Diamond stepped into the lift on the 31st floor of Barclays' global headquarters in London's Docklands at about 8pm on Monday night, there was no indication that it was the last time he would be seen in the bank's chic executive suite as its boss.
It had been a tumultuous day in the most difficult week in the British banking giant's history but for the urbane 60-year-old Barclays chief executive it must have seemed he had at least earned a few hours' respite from the reputational wrecking ball unleashed by the rate-fixing scandal.
At 7am that morning, the bank's chairman, Marcus Agius had fallen on his sword by resigning with the words "the buck stops with me". It was a move widely interpreted as an attempt to ensure that Mr Diamond stayed at the helm of the notoriously complex bank and its £1.5trn of assets.
Shortly after lunch, the CEO put the finishing touches to his plan to shore up his position by sending a 1,800-word letter to Barclays' staff in which he made clear that he was staying put to make sure the Libor manipulation debacle "cannot happen again".
With the sort of hand-on-heart emotion that is rarely displayed in the testosterone-fuelled world of high finance, Mr Diamond twice declared his "love" for Barclays. But within less than 24 hours, this billet-doux had turned into a professional adieu.
At some point between 8pm and a late-night phone call from a freshly-reinstated Mr Agius to the Chancellor, George Osborne, announcing that Mr Diamond was stepping down, events turned drastically against the American-born chief executive, whose personal fortune is estimated at £105m.
All of a sudden, the entrance to 1 Churchill Place – Barclays HQ in Canary Wharf – had been turned into a career-transforming revolving door, spitting out Mr Diamond and (although it would not be confirmed until yesterday afternoon) the chief operating officer, Jerry del Missier.
Remarkably, Mr Agius, having fulfilled his role as corporate fall guy on Monday, found himself travelling in the opposite direction and was restored back to his office on the 31st floor with the sort of title that summed up the crisis in the bank's highest echelons – full-time chairman (temporary).
Mr Agius underlined the personal nature of Mr Diamond's decision, telling Sky News the decision was made "after something just snapped last night". But in his resignation statement, issued at 7am yesterday, Mr Diamond hinted at what he saw as the reason why his position had become untenable. He said: "The external pressure placed on Barclays has reached a level that risks damaging the franchise – I cannot let that happen. I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth."
Sources close to Mr Diamond initially briefed that he had decided to go after he saw the reaction of shareholders and politicians to the carefully-choreographed departure of Mr Agius and continuing calls for his own resignation.
But by yesterday lunchtime it was increasingly clear that matters were more complicated than this and that the dethroning of Diamond may have been the direct result of a clash between Barclays and two of the highest financial instruments of the British state – the Bank of England (BoE) and City regulator, the Financial Services Authority (FSA).
At an unspecified time yesterday, Sir Mervyn King, the Governor of the BoE, phoned Mr Agius for what is likely to have been what diplomats refer to as a "frank exchange of views" about the suitability of Mr Diamond staying in post. A similar conversation is understood to have taken place between Barclays and the FSA.
When asked if the FSA would have subjected Mr Diamond to a "fit and proper person" test had he stayed in post, Andrew Bailey, the head of the FSA Prudential Business Unit, said yesterday: "The [Barclays] board had to decide who the best person was to lead cultural change. If the answer had come back that 'it's Bob Diamond', which it could have done, then yes, we would have had to have taken a view on that."
What precisely lay behind this Establishment pincer movement will depend on the accuracy of Barclays claims, encapsulated by the internal memo released yesterday of a conversation between Mr Diamond and the BoE deputy governor Paul Tucker, that the central bank was at the very least aware of Libor manipulation in 2008.
There was speculation yesterday that the attempt to implicate the BoE in tacit approval of the rate-fixing scam, first reported by the BBC's Robert Peston on Sunday, had crossed a line in an unwritten code of City conduct whose first clause was not to impugn the Old Lady of Threadneedle Street.
Lindsay Thomas, a former FSA director, said the BoE would have taken a particularly dim view of any attempt to drag it into the dock over rate fixing. She told BBC Radio 4:"I think the Governor would have called Barclays and made it plain that [the resignation of Mr Diamond] was what they expected to happen."
The full intricacies of what took place, including the identity of unnamed Whitehall figures who had expressed concern to Mr Tucker about Barclays inter-bank lending rate submissions at the height of the credit crunch, threaten to be the most damaging chapter of the scandal.
But in the meantime, it was clear as Mr Diamond made his way back to his Kensington townhouse yesterday that the most powerful regulators in Britain had formed the same view as Lord Mandelson once famously did, that the Barclays chief executive was the "unacceptable face of banking".
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