BARCLAYS SCANDAL: CAN NIGERIA LEARN ANYTHING?

Can Nigeria’s financial institutions and regulatory bodies learn anything from Barclays’ bank chairman resignation? MARCUS AGIUS says “He is truly sorry” and says ‘the buck stops with me’ following resignation. Barclays releases statement confirming resignation this Monday (2^nd July, 2012). The independent enquiry resulted in the Chairman yielding to investors’ request. He has said he is truly sorry for letting customers and investors down.  

Can CBN (Central Bank of Nigeria) take any lesson from this especially with the level of corruption that has eaten deep into our system in Nigeria?

Last week events have dealt a devastating blow to the reputation of the bank.

When it comes to integrity issues, it shows how people can sacrifice their position to move an organisation forward. How people are willing to give up power around here?

Meanwhile, Lord Turner of Ecchinswell, the head of the Financial Services Authority, said “more heads will roll” at badly behaving banks.

THE STORY:

 In his statement,Marcus Mr Agius said: he was "truly sorry" and that "the buck stops with me".
Last week Barclays was fined £290m ($450m) for attempting to manipulate the Libor inter-bank lending rate.

Yesterday it emerged that Barclays stepped up its efforts to rig interest rates after Bob Diamond, its chief executive, personally spoke to the deputy governor of the Bank of England. Bob Diamond had a conversation with Paul Tucker about how much Barclays was claiming it had to pay to borrow money during the financial crisis in 2008. After Mr Diamond spoke to Mr Tucker, Barclays staff came to believe the Bank of England wanted them to falsify this data — which was used to calculate Libor, the interest rate that banks pay to each other.

The bank’s traders then escalated their secret attempts to manipulate the markets and make it appear that the bank was paying less to borrow money than was actually the case, documents show. Sources at both banks said this was the result of a “misunderstanding” and insisted that Mr Tucker had not sanctioned Barclays’ actions.

At the time, the Bank of England was keen to see a lower Libor rate, as that would have been a positive sign in the depths of the credit crunch.

The disclosure increases the pressure on Mr Diamond, who has now been put at the heart of discussions about the fixing of Libor.

When he gives evidence to MPs this week the bank chief will also have to explain why his employees were left with the understanding they had the Bank of England’s blessing.

As the board of Barclays called an emergency meeting last night, there were calls for a criminal inquiry into the bank by Vince Cable, the Business Secretary, and Lord Blair of Boughton, the former Metropolitan Police commissioner.

Mr Diamond is also facing calls to step down over his failure to spot the scandal, which may have caused banks to charge mortgage holders, credit card users and businesses too much for billions of pounds in loans.

Barclays was last week fined £290 million for its role in the affair. Other high street banks are expected to face heavy penalties for similar wrongdoing.

Bob Diamond had a conversation with Paul Tucker about how much Barclays was claiming it had to pay to borrow money during the financial crisis in 2008.

After Mr Diamond spoke to Mr Tucker, Barclays staff came to believe the Bank of England wanted them to falsify this data — which was used to calculate Libor, the interest rate that banks pay to each other.

The bank’s traders then escalated their secret attempts to manipulate the markets and make it appear that the bank was paying less to borrow money than was actually the case, documents show.

Mr Diamond is likely to face calls to issue a full apology when he is questioned by the Treasury committee on Wednesday. Sources confirmed he would be asked exactly what he talked about with Mr Tucker, the second most senior figure in the Bank of England, during the crucial phone call about Libor in October 2008.

MPs will be especially keen to know how a confused message was passed on to Barclays traders, who ended up “escalating” the rate-rigging scandal soon afterwards.

Although the bank chief may have to give evidence under oath, he is expected to stonewall many questions for legal reasons. John Mann, an MP on the Treasury committee, said Mr Diamond would face tough questions about the conversation.

“I’m certain that issue will come up,” he said. “We will certainly want answers as to if Bob Diamond has been hands-on and it will be surprising if he wasn’t. We want to know exactly what he was doing.”

Both Barclays and the Bank admit that a conversation took place about Libor but deny there was any instruction to lower the rate. They claim that traders misunderstood directions from their superiors about how they should deal with Libor.

The Financial Services Authority accepted the explanation that instructions from the bank’s executives were misinterpreted by more junior employees.

“No instruction for Barclays to lower its Libor submissions was given during this telephone conversation,” the FSA said.

“However, as the substance of the telephone conversation was relayed down the chain of command at Barclays, a misunderstanding or miscommunication occurred. This meant that Barclays’ submitters believed mistakenly that they were operating under an instruction from the Bank of England as conveyed by senior management to reduce Barclays’ Libor submissions.”

US regulators believe that a member of Barclays’ senior management team was responsible for the message that the bank’s data needed to be lower.

One trader emailed his boss at the time to say: “Following on from my conversation with you I will reluctantly, gradually and artificially get my Libors in line with the rest of the contributors as requested. I disagree with this approach as you are well aware. I will be contributing rates which are nowhere near the clearing rates for unsecured cash and therefore will not be posting honest prices.”

At the time of Mr Diamond’s conversation with Mr Tucker, the Bank of England was keen to see Libor reduced, as a higher rate was a sign that the credit crunch was strangling lending between the banks.

However, the Bank of England last night insisted it was “nonsense” to suggest that it was aware of any impropriety in the setting of Libor.

A spokesman added: “If we had been aware of attempts to manipulate Libor we would have treated them very seriously.”

Several other companies are also expected to settle with the regulators, after George Osborne, the Chancellor, disclosed that the Royal Bank of Scotland was among the dozen banks or so under investigation.

It emerged over the weekend that RBS has sacked up to 10 traders in connection with Libor fixing.

Bob Diamond (Chief Executive of Barclays) is expected to receive £20 million if he resigns from Barclays following pressure on Him to resign.

Despite having overseen Barclays’ investment banking arm, which manipulated the world’s benchmark borrowing rate, Mr Diamond would be entitled to 12 months salary (£1.35 million), pension contributions and other benefits worth £2.5 million should he step down.

On top of this, the Barclays boss owns 13.2 million shares in the bank that have been granted to him during his 15 years of service. At Thursday's closing price this holding would be worth nearly £22 million.

The political and public outcry following Barclays’ admission that it manipulated Libor continued to build as the scale of the bank’s attempted rigging of the market became clear.

Vince Cable, the Business Secretary, said Mr Diamond had “a lot of questions to answer” and warned that the Government could order his removal if he was found to have had a personal role in the scandal.

“There are last resort powers of director disqualification, “ he said, but added: “I think it is premature to decide what exactly should happen to Mr Diamond, whether it is in respect of his pay or tenure or any other aspect.”

This year, the chief executive received a total pay package worth more than £17 million, which caused upset within the bank as some directors were reported to have felt that his performance did not justify the payment of any bonus.

It led to a shareholder rebellion at the bank’s annual meeting in April, with nearly a third of investors refusing to back the pay plans.

This week, Barclays has been holding meetings with investors to discuss the Libor scandal, with some major shareholders already favouring ousting the American banker despite his offer to waive his bonus for this year.

Banking industry veterans also think that Mr Diamond should consider his position. One senior banker speaking on condition of anonymity yesterday said he felt the scandal should lead to the departure of executives.

“I am amazed there haven’t been any resignations yet. Just giving up his bonus is not enough given the scale of this,” he said.

Chris Lucas, Barclays’ finance director, has also said he will not take a bonus in an effort to placate public and political anger. Jerry del Missier, the bank’s chief operating officer, and Rich Ricci, head of investment banking, have also given up their bonuses.

Mr Diamond’s time at Barclays has often been marked by controversy, with Lord Mandelson, the former business secretary, once referring to him as the “unacceptable face of banking” because of the size of his bonus.

Speaking to the Treasury select committee earlier this year, Mr Diamond said the time for contrition by banks was over, a remark that has come back to haunt him after he was forced to apologise over this latest scandal.