3 Jul 2012

Barclays releases key Bob Diamond memo

Following the resignation of Bob Diamond in the midst of the bank lending scandal , Barclays releases a memo of a phone conversation between Mr Diamond and Bank of England Deputy Governor Paul Tucker.

The memo, written by Mr Diamond to Barclays’ then chief executive John Varley during the banking crisis in October 2008, says Mr Tucker had said that Barclays’ inter-bank borrowing rates were higher than they needed to be.

The note also says that Mr Tucker had told Mr Diamond that “a number of senior officials in Whitehall” were worried about the rates at which Barclays was borrowing money from other banks.

The allegation is significant because Barclays has admitted that staff tried to manipulate these rates, which led to the resignations of Mr Diamond as chief executive and Chief Operating Officer Jerry del Missier on Tuesday.

By the end of the day Bob had concluded that it was just not going to be possible for him to be able to do what he needed to do. Barclays Chairman Marcus Agius

Recent reports have suggested that Barclays believed it had received approval from Mr Tucker to talk down its borrowing costs, included in the so-called Libor rate which is supposed to reflect what banks are charging one another to borrow.


But in a submission to the Treasury select committee, where Mr Diamond is appearing on Wednesday, Barclays says that while Mr Diamond had not believed he had received “an instruction” from Mr Tucker to alter the bank’s Libor declarations, Mr del Missier had assumed this was the case.

The submission says: “However Jerry del Missier concluded that an instruction had been passed down from the Bank of England not to keep LIBORs so high and he therefore passed down a direction to that effect to the submitters.”

The accuracy of the Libor rate is important because it affects the borrowing costs of individuals and businesses. During the 2008 banking crisis, the rate was pushed higher because banks were reluctant to lend to one another.

‘Reduce the temperature’

Speaking to Channel 4 News, Marcus Agius, the outgoing chairman of Barclays who announced his resignation on Monday, said he had hoped his exit would “reduce the temperature surrounding the bank”, but this had not happened.

“In fact, exactly the opposite happened and if anything the pressure on Bob Diamond increased. I think that made life very difficult for him and I think that as the day went on the pressure was actually ratcheting up again …. and I think by the end of the day Bob had concluded that it was just not going to be possible for him to be able to do what he needed to do, which is to lead the bank forward without distractions and to work as I am trying to help him to do to restore the reputation of the bank.”

Mr Agius was asked if Mr Diamond had been leaned on to resign by Bank of England Governor Sir Mervyn King and Financial Services Authority Chairman Lord Turner, but he declined to answer, saying Mr Diamond had made “a personal decision”.

Amid reports that Mr Diamond will receive a multi-milion pound pay-off, he said: “The question of his pay hasn’t even been discussed yet.”

In his resignation statement, Mr del Missier said: “I am grateful for the opportunities that were provided to me and proud of what we achieved. We built one of the premier global investment banks from scratch â?? something that we are all very proud of.

“The firm is as strong today as it ever has been and is incredibly well placed to succeed within the post financial reform competitive landscape.”

Chancellor George Osborne said Mr Diamond’s resignation was the “right decision for Barclays and for the country”.

‘Deeply disappointed’

Labour leader Ed Miliband said: “This was necessary and right. It was clear Bob Diamond was not the man to lead the change that Barclays needed.

“But this is about more than one man – this is about the culture and practices of the entire banking system, which is why we need an independent, open, judge-led public inquiry.”

In a statement, Mr Diamond, who had faced mounting calls to step down, said: “The external pressure placed on Barclays has reached a level that risks damaging the franchise.”

He added: “I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth.”

The move comes after Barclays was fined £290m by UK and US regulators for manipulating Libor.

Marcus Agius will lead the search for a new chief executive immediately, Barclays said.

Diamond's not forever

It might well be that the intervention of Sir Mervyn King has ultimately done for Bob Diamond, writes Channel 4 News Economics Editor Faisal Islam.

It was a complete coincidence that the Bank of England hosted a press conference on Friday morning. But the governor's words illustrated just how fraught the relationship had become between Barclays and its central banker.

Read more: Diamond not forever as UK banking changes for good

Mr Diamond confirmed he would still appear before the Treasury select committee on Wednesday to answer questions over the rate-fixing allegations which ultimately led to the government launching a parliamentary probe into banking culture.