Barclays chairman Marcus Agius has admitted the bank should have changed how much scrutiny was given to Libor by its compliance department as the credit crunch made the rates less predictable.
Giving evidence to the Treasury select committee this morning, Agius said historically the behaviour of the Libor rate had been predictable, was seen as low risk and was given a low priority by the bank’s compliance department.
As credit conditions worsened in 2007 and 2008, he said rates became less predictable but no changes were made to Barclays’ oversight of its submissions.
He said: “For many years the activities of the Libor market were seen to be low risk because the passage of the Libor rate was constant, the spreads were very narrow and very little happened. The chance that anybody could manipulate the rate successfully was deemed to be very, very low.
“As the credit crisis occurred the behaviour of Libor departed from its systemic patterns and evidently that led to an opportunity for risk and for people to take advantage of that. We should have changed our compliance in recognition of that, we were behind the curve and that is most unfortunate and it explains why these things were allowed to happen…but it does not excuse any of it.”
Despite Bob Diamond giving evidence last week that Barclays was concerned Libor submissions from other banks could be lower than their actual borrowing costs, Agius said it “did not occur” to Barclays to look at its own submissions to make sure they were sound. “It should have done, but this was a moment of existential risk,” he said.
TSC member and Scottish National Party treasury spokesman Stewart Hosie said: “So, someone is giving an instruction to manage the reputation of Barclays by lowering Libor submissions and no-one in charge of the bank knows anything about it. You can understand how difficult the public will find believing that?”
“Yes I can,” said Agius.