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King: Barclays was in ‘denial’ over our concerns about bosses

Mervyn King Bank of England TSC

Bank of England governor Mervyn King says Barclays was in ‘denial’ over the concerns regulators had about the executive management at the bank.

Last week, Barclays chairman Marcus Agius told the Treasury select committee that a representative from the FSA had told him the bank’s corporate governance was “best in class”. Yesterday, FSA head of prudential business unit told the committee Barclays had a culture of “gaming” regulatory rules, branding it an “outlier” compared to other banks.

Giving evidence to the TSC this morning, King said the FSA had made clear to him its concerns with the bank and that is the reason he called Barclays’ chairman Marcus Agius and non-executive director Michael Rake to a meeting in Threadneedle street the day Agius resigned.

He said: “When I met the two of them it became clear to me that it had not been taken on board, the loss of confidence of the regulators in the executive management. The point of my meeting was to say you really need to understand the depth of concerns over the executive management.

“The board of Barclays had been in something of state of denial about the concerns of the regulator and I wanted to make sure they understood those concerns had been shared with the Bank, that they were not just a comment that had been made in one letter, they were genuine deep concerns and they had to be taken seriously.”

The next morning, Bob Diamond resigned as Barclays chief executive.

TSC chair Andrew Tyrie, said King had handed Agius a loaded revolver and was “telling him to shoot his chief executive”. He added that because this was done through an informal conversation, rather than an official ruling that Diamond was not a fit and proper person, the episode had set a precedent for the “arbitrary use of power” by the Bank. Tyrie said new governance measures needed to be put in place at the FSA and the Bank of England to stop this.

King said: “ You do not need governance to have a conversation.

“It was their decision and it had to be seen as their decision and so I do not accept that what happened was the arbitrary use of power it was the exercise of judgement and the conveying of information that was important to the board to them.”

All Party Parliamentary Group on economics, money and banking chair Steve Baker says: “Whenever I hear people discussing the ability of the governor of the central bank to raise his eyebrow and bring a bank into line, that immediately says to me arbitrary power. One of the great victories of the English civil war was that we insisted on the rule of law, not the rule of men, and when it comes to things like central banking we are backsliding and thinking what we need is authority in our lives whilst establishing the tyranny of the nursery.”


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There is one comment at the moment, we would love to hear your opinion too.

  1. I wonder if Steve Baker has the right experience for understanding the City and what is practical there. The last paragraph paints him as being somewhat idealist.

    His Bio is on:

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