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 (2nd
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:
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.
