Libor Criminal Investigations Will Happen: Diamond

Bob Diamond, the recently-departed chief executive of Barclays, told U.K. politicians that there would be criminal investigations into the manipulation of the London interbank offered rate (Libor) scandal which led to his resignation.

Robert Diamond, CEO of Barclays.
Jerome Favre | Bloomberg | Getty Images
Robert Diamond, CEO of Barclays.

His testimony to the Treasury Select Committee brought some relief for Paul Tucker, Deputy Governor of the Bank of England, when he confirmed that the official expressed concerns about the bank’s high lending rates during the 2008 financial crisis but didn’t encourage Barclays to report artificially low rates in an attempt to manipulate Libor.

Chancellor of the Exchequer George Osborne accused politicians from the previous Labour administration of being involved in the scandal. He said those around former Prime Minister Gordon Brown were “clearly involved” in discussions about how to keep the Libor rate down at the height of the financial crisis in an interview with U.K. magazine The Spectator.

On Tuesday, Barclays released a memo from Diamond suggesting that Paul Tucker, currently Deputy Governor of the Bank of England, had implied that Barclays could lower its rates in 2008, when Libor was being anxiously watched as a measure of the health of the banking system.

Diamond said that he understood the crucial conversation with Tucker to mean that “ministers” had expressed concern about how high Barclays’ Libor rate was.

“It’s not the first conversation I had with Paul about relative levels of Libor. Barclays had consistently been at the high end,” Diamond said.

“I was worried that other banks were posting levels significantly below ours which didn’t seem to be right. If this is going to impact our ability to raise money, that’s a huge issue.”

Barclays was trying to raise money from Middle Eastern investors at the time.

“The single best decision Barclays got right was when in October 2008 the FSA asked banks to hold more equity, we raised capital privately,” Diamond said.

He added that his main concern after the conversation with Tucker was whether that fundraising could be jeopardized by Barclays’ relatively high Libor rates.

Diamond said that Jerry del Missier had admitted “there was a misunderstanding” and that “he was the person that instructed” Barclays to lower their Libor submissions.

Diamond seemed confident under questioning by MPs, rarely allowing himself to seem ruffled. He maintained that he only found out about the lowballing of Libor “this month” – presumably meaning June, when Barclays announced the fine.

Tucker has requested to appear in front of the same committee of MPs later this month. No date has been set yet, but it is likely to be before Parliament stops for the summer on July 17.

Diamond said that the industry was aware of the issue with the lending rate and could not deny this.

Asked about whether he should receive a payout, Diamond, who is believed to be entitled to close to 20 million pounds in long-term incentive plans and salary over the next two years, said that that was “a matter for the board.”

UK Prime Minister David Cameron said on Wednesday that it would be “completely wrong” and “inexplicable” for him to receive a large payoff from the company after the announcement on Libor.

Andrew Tyrie, chair of the committee, said that the Financial Services Authority had raised questions and worries about Diamond’s leadership. Diamond said he had not heard anything about regulators questioning his stewardship of the company.

Diamond said that the notorious emails between Barclays traders and other banks over Libor manipulation made him “physically ill.”

“These traders were acting on behalf of themselves. They had no idea of what was best for Barclays,” he told the Treasury Select Committee of MPs.

He added that there is a “no jerk” rule at Barclays, to avoid employing "jerks."

The emails released as a result of Barclays paying a $453 million fine to regulators over the Libor scandal show traders calling each other “Big Boy” and promising bottles of Bollinger in return for artificially lower rates.

Libor) has already claimed two high profile scalps at Barclays, Diamond and Jerry del Missier, its chief operating officer.

The fallout from the scandal may include tougher regulation, after the government announced an inquiry into the matter.

Written by Catherine Boyle, Twitter: @catboyle01