Robert Diamond and Paul Tucker are nursing bruised reputations as the U.K. Parliament’s Treasury Select Committee interrogates central players in the Libor scandal. Former Barclays CEO Diamond faces being hauled back to address more questioning after successive interviewees contradicted his testimony, while Tucker, deputy governor of the Bank of England, will struggle to succeed Sir Mervyn King as governor after failing to convince the committee he was sufficiently tough in responding to evidence of Libor manipulation. There are also concerns about the role of the Financial Services Authority, the regulator of the banks.
Jerry del Missier, Diamond’s close colleague of 16 years who resigned as Barclays COO earlier this month, insisted on July 16 that Diamond had given him an “instruction” to lower the bank’s Libor submissions in 2008. Yet Diamond had said on July 4 that del Missier had acted on his own initiative after misinterpreting Diamond’s October 2008 file note of a conversation with Tucker. The note recorded that Tucker thought Barclays’ submissions “could be lower.” Tucker denied, in his testimony on July 9, “leaning” on Barclays.
Diamond’s insistence that, despite the bank’s difficult relations with the U.K.’s Financial Services Authority even before the Libor scandal, the regulator had been happy with the leadership of the bank was also flatly contradicted by Andrew Bailey, the Bank of England’s head of prudential regulation on July 16. At the same hearing, FSA chairman Adair Turner said Barclay’s showed “a cultural tendency to be always pushing the limits of the rules.” But as the committee heard, Turner did not think it was appropriate to veto the appointment of del Missier as COO of Barclays in June, and indeed he was cleared by the FSA of any wrongdoing after a six-month investigation in 2011.
Two members of the Select Committee, David Ruffley and John Mann, had argued on July 10 that Diamond should be recalled for another hearing after an FSA letter dated April 10 was released. The letter, from the FSA’s Turner to Barclays chairman Marcus Agius, appeared to undermine Diamond’s contention that the FSA was broadly happy with the bank. It said the FSA was concerned about the whole “culture” of the firm. “Barclays has a tendency continually to seek advantage from complex structures or favorable regulatory interpretations,” the letter stated, adding that “the net impact has clearly been unfavorable to the degree of external trust in Barclays’s approach to issues such as tax, regulation and accounting.”
Shareholders have had concerns for some time, and nearly a third of them voted against Diamond’s £17.7 million ($27.6 million) pay package in April. As Iain Richards, head of governance and responsible investment at Threadneedle Investments in London, an investor in Barclays, says, “The current situation and change is the culmination of persistent problems in and concerns about the bank’s culture and practices.” Barclays had sailed close to the wind with the authorities, being forced in February by the U.K. Revenues and Customs to pay £500 million in tax it had tried to avoid through schemes described as “aggressive” by the government. Its retail bank has been fined repeatedly for “mis-selling” a number of products to customers, although it is not alone in that respect.
Tucker, meanwhile, was criticized on July 17 by members of the Select Committee, which is chaired by lawmaker Andrew Tyrie, for failing to take the Federal Reserve’s 2008 warnings of Libor manipulation sufficiently seriously. Tucker admitted the Fed’s concerns “did not set alarm bells ringing at the time.” He was further embarrassed by the disclosure of emails that hinted at a warm friendship with Diamond. After the then-Barclays Capital CEO congratulated him on his appointment as deputy governor in December 2008, Tucker wrote back, “Thanks, Bob, you’ve been an absolute brick through this.”
