– Barclays Chief Says ‘Sorry’ (Wall Street Journal, July 3, 2012):
LONDON—Barclays BARC.LN +2.73% PLC Chief Executive Robert Diamond apologized for the interest-rate manipulation scandal that has engulfed the U.K. bank but resisted outside pressure to resign.
In a letter to employees, the 60-year-old Mr. Diamond, Barclays CEO since 2011, said he was “sorry” and vowed to impose new internal controls. “I am disappointed because many of these behaviours happened on my watch. It is my responsibility to make sure that it cannot happen again,” Mr. Diamond wrote.
– Barclays CEO Robert Diamond Resigns (Wall Street Journal, July 3, 2012):
LONDON—The chief executive of Barclays BARC.LN +3.53% PLC, Robert Diamond, resigned Tuesday amid intense political and investor pressure from the British bank’s involvement in rigging an important interest-rate benchmark—and another senior executive appeared close to following him out the door.
The scandal is tearing through Barclays’s top ranks. Two people close to the bank said Tuesday that Jerry del Missier, the chief operating officer, is likely to step down from his role. Monday, the bank said Chairman Marcus Agius would resign.
Mr. Agius will remain chairman while Barclays searches for his replacement—and for a new chief executive, the bank said. Mr. Diamond will leave the bank immediately.
The departures effectively leave one of Europe’s largest banks without leadership. That could set the stage for the elevation of Antony Jenkins, Barclays’s chief executive of retail and business banking, to CEO, according to two people close to the bank. The bank is also considering external candidates.
Pressure on Mr. Diamond increased after the bank agreed last week to pay $453 million to settle a U.K. and U.S. probe that showed traders had blatantly sought to manipulate the London interbank offered rate, or Libor, to disguise the high cost of the bank’s own funding and to pad the profits of certain traders. A person close to Barclays management said Mr. Diamond made the decision to leave late Monday night, feeling “it was the right thing for the bank.”
The shake-up at Barclays could be mirrored elsewhere in coming months. Barclays was the first to settle in a continuing investigation of a handful of global banks by U.S., U.K. and Asian authorities. Other banks that have disclosed they are being investigated include Citigroup Inc., C +0.18% Deutsche Bank AG, DBK.XE +1.33% HSBC Holdings HBC +1.74% PLC, J.P. Morgan Chase JPM +1.52% & Co. and Royal Bank of Scotland Group PLC. RBS.LN +0.37%
Mr. Diamond’s departure comes one day before the CEO will face tough questions from the U.K.’s Treasury Select Committee about the rate-fixing efforts at Barclays.
Key will be whether Mr. Diamond or his top managers expressly ordered traders to submit lower rates to make the bank’s funding position look stronger during the financial crisis. Mr. Diamond had a conversation with top Bank of England official Paul Tucker about Libor rates in 2008, according to the report by regulators and people familiar with the matter.
The 60-year-old chief executive has faced a tumultuous 17 months as the head of the bank. During his stint, Mr. Diamond attempted to reshape Barclays into an investment banking powerhouse.
But he came under pressure from investors after the plan fell short amid the economic crisis. He also sparked the ire of politicians and regulators with his brazen style that saw him defend banker pay and fend off a tax and insurance misselling scandal. The latest controversy proved to be the final straw, analysts say.
“Ultimately they’ve reached the right decision. Diamond was a key drag to sentiment,” said Gary Greenwood at Shore Capital.
Others expressed dismay at Mr. Diamond’s departure.
Barclays “has not been well served or rewarded for its co-operation with the regulators,” said Ian Gordon, an analyst at Investec Securities in London.
Mr. del Missier, the chief operating officer, took that post just a few weeks ago following several years as co-head of Barclays’s investment bank. He earned a reputation for being skilled in complex trading strategies as well as in cultivating clients. A Canadian, Mr. del Missier has been at Barclays since 1997, and his elevation to the chief operating officer role was an effort to bolster the bank’s global operations during a period of regulatory upheaval.
It isn’t clear, given the turmoil at the top of the bank, when—or precisely how—Mr. del Missier’s fate will be resolved.
The U.K. government announced Monday a series of inquiries into ethical standards in the banking industry and as the U.K. Serious Fraud Office said it was considering criminal prosecutions against those who attempted to rig the rates.
Barclays declined to comment on when a successor to Mr. Diamond would be named. On Monday the bank was reviewing succession plans for the CEO, according to a person familiar with the matter. Under the terms of his employment agreement, Mr. Diamond is entitled to six months’ salary after a voluntary resignation. He earned £1.35 million ($2.12 million) in salary last year. He’s not automatically entitled to a bonus for this year, but he could still receive payouts under long-term plans. The bank says it is still negotiating the terms of Mr. Diamond’s departure.
A spokesman said that Mr. Diamond’s past bonuses were unlikely to be clawed back, because the attempts at rate manipulations happened more than three years ago and the term for clawbacks on those years’ bonuses has expired.
Mr. Diamond’s departure marks a victory for the U.K’s political establishment, which has long complained about the bank’s management culture. On Tuesday U.K Chancellor George Osborne hailed the move.
“I think it’s the right decision for Barclays. I think it’s the right decision for the country because we need Barclays bank to focus on lending to our economy and not distracted by this argument about who should be in charge,” Mr. Osborne said on BBC radio. “I hope it’s a first step to a new culture of responsibility in British banking.”
Libor: What You Need to Know
What it is: Libor – or the London interbank offered rate benchmark – is supposed to measure the interest rates at which banks borrow from each other. It is based on data reported daily by a 16-bank panel. Other interest rate indexes, like the Euribor (Euro interbank offered rate) and the Tibor (Tokyo interbank offered rate), function in a similar way.
Why it’s important: More than $800 trillion in securities and loans are linked to the Libor, including $350 trillion in swaps and $10 trillion in loans, including auto and home loans, according to the CFTC. Even small movements – or inaccuracies – in the Libor affect investment returns and borrowing costs, for individuals, companies and professional investors.
How Libor Is Set
- By 11:10 a.m. London time, the banks on the Libor panels submit to Thomson Reuters, as an agent for the British Bankers’ Association, their estimated borrowing rates.
- Thomson Reuters discards the highest and lowest submissions. The remaining 50% of the submitted quotes are averaged to work out the Libor rate.
- By about 11:30 a.m. London time, Libor rates are published.