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‘Mervyn King made clear regulators had lost confidence in Diamond’

Bob Diamond TSC 480

Bob Diamond resigned as Barclays chief executive after Mervyn King called the bank’s chairman Marcus Agius to a meeting and told him Diamond no longer had the support of the FSA.

Diamond (pictured) quit as chief executive last Tuesday. Giving evidence to the Treasury select committee this morning, Barclays chairman Marcus Agius said that he and senior non-executive director Sir Michael Rake were called to meet BoE governor Mervyn King the night before.

He said: “It was made very plain to us that Bob Diamond no longer enjoyed the support of his regulators, the Governor was very clear to say he had no power to direct us but he felt this was sufficiently important, as it was, for us to be told in absolute terms what the situation was.”

Agius told MPs that he thought this was a shock because when on the Wednesday before, Barclays released details of its £290m settlement with the FSA and two US authorities admitting that the bank had attempted to manipulate its Libor submissions the FSA had said nothing about the suitability of Diamond or any other senior management.

Agius said: “Clearly what had happened was that the public outcry had been far greater than we had thought, my own resignation which I had sought to offer to alleviate some of the pressure was inadequate and clearly the regulators decided more is necessary.”

Agius was reinstated as chairman after Diamond’s departure.

TSC chair Andrew Tyrie said: “What you have described is direct exercise of considerable regulatory authority. Effectively for a brief while the taking over of the top of Barclays’ management structure by the Bank of England.”

Giving his evidence last week, Diamond refused to say whether regulators were behind his decision to quit.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. I have severe reservations over some of the implications behind this article.
    Ignore for a moment any like or dislike of Barclays and/or banks. Ignore the alleged criminality. Just consider the wider implications of the way the process is unfolding. Let me put the point quite simply – I as a regulator do not like you therefore I will drive you out of business. In fact it goes even further than that – the public want blood so I as a regulator will change my stance and will drive you out of business. I do not see this as an acceptable stance from a regulator.
    Why should an investment industry work from the UK when the attitude of the regulator is based on an ever changing moralistic philosophy. Regulatory rules may well have a moral aspect, but the implementation of those rules should be clear and consistent. That is not, and never has been the case in the UK.
    Has Mr Diamond personally done anything that can be considered to be either a statutory crime or a regulatory crime? His case has not even been investigated yet, let alone proven. Yet he has been driven out by external pressure. Lynch mob law from an organisation that should be encouraging moral rectitude? Is this a sensible course of action to tolerate?
    The FSA have praised Barclays for their co-operation but also indicated that they were unhappy because Barclays were aggressive in their interpretation of the regulations. Not wrong, just aggressive. Is this a basis on which to apply regulatory pressure? I may not like Barclays’ business model, but that should not be a basis for punishing them, or any of their employees.
    I am pleased that Mr Diamond did resign because I believe that someone needs to accept ultimate responsibility when institutional wrong doing is discovered. I am pleased the SFO is going to investigate the alleged wrong doings. Given the strange relationship that exists/existed between the FSA and Banks I am not surprised that the FSA did not immediately instigate or call for a criminal investigation. I am very uncomfortable about the behind the scenes pressures that are clearly going on in order to arrive at this point.
    If regulation is to work it must be transparent and seen to be transparent. It must be based solidly on the Rule of Law, not lynch mob law or even St James St Club Law.
    It is quite evident that the Bank of England quite happy to use the “knife in the back” technique. Again an approach that is not only opaque but lacks the moral standing one expects from a central regulator. If Mr Diamond does not want to be “one of the boys” that should be his choice. It should not be a basis for judgement. Wrong doing is the basis for judgement.
    I think that the Treasury Select Committee should go back to investigating the workings of the FSA and the Bank. There are far too many grey areas. If someone does wrong then by all means hang them out to dry. But do not ostracise them merely because they are not part of “The Club”. One would have hoped such a process would not happen at the highest levels in the 21st Century. That isn’t the case, is it.
    Regulation is the UK is poor not because it is light touch, heavy touch or merely incompetent touch. The central problems are that it is not clear, consistent, transparent and based on any level of reality. It is still an 18th Century Gentleman’s Club.

  2. Julian Stevens 11th July 2012 at 4:48 pm

    I’ve yet to read any explanation of why Hector Sants resigned when he did. Did he jump or was he pushed? Or did he jump before he was pushed? And the timing of his departure is most, ah, intriguing ~ the very Friday before the LIBOR-fixing bomb went off the following Monday. Coincidence?

    It’ll be interesting to see if the TSC calls him out of gardening leave to ask him a few searching questions, such as how much the FSA knew about Barclays’ LIBOR-fixing, for how long and how long was allowed to elapse between when it became aware of these activities and embarked on appropriate regulatory action to address them.

    In the face of those sorts of questions, it won’t be enough merely to cite the FSMA 2000 and to wave the FSA’s now somewhat tattered consumer protection flag, will it?

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