4 Jul 2012

Exclusive: leak from secret FSA Barclays assessment

“Wow… I love Barclays” is how Bob Diamond starts, going on: “I love Barclays. History will judge Barclays as an incredible institution because of its people”.

UPDATE 9.30pm

I understand that the bombshell quotes about Bob Diamond read out by Andrew Tyrie this afternoon came from part of Barclay’s highly secret FSA “Arrow” assessment.

The leak to TSC chair Tyrie, left insiders “concerned and perplexed”.

They said it was a “partial and selective leak” from the 2012 Barclays Arrow assessment, which is the annual process between the FSA and banks to assess risks.

The insider said that the criticisms of Diamond were only “risks”, but the leak of an FSA Arrow assessment was “unprecedented” and “very serious”.

Financiers are concerned about the integrity of full and frank disclosure required between FSA and banks if Arrow assessments leaked.

And it does rather raise the question of who leaked it, after a week-long spin battle at the highest levels of Britain’s financial system.

It also rather confirms the points put by Mr Tyrie to Mr Diamond under parliamentary privilege as an accurate reflection of words used in part of this FSA assessment.

I write sitting aboutĀ five metres away from Bob Diamond. The Treasury Select Committee is only 60 minutes in, but there has already been a bombshell. It came not from Mr Diamond himself, but from Treasury Select Committee Chair Andrew Tyrie.

Tyrie clearly has had a briefing or documents from the FSA about concerns expressed on two separate occasions. He suggests the FSA had reservations about Diamond’s appointment as CEO in Sep 2010.

Diamond says that’s the first he’s heard of it. And then in February this year the FSA came to the board and expressed concerns, Tyrie suggests in a question, going as far as saying that the “FSA lost confidence” in Diamond’s leadership after a series of crises.

The Protium scandal in particular, a questionable means for Barclays to dispose of toxic assets, had raised eyebrows. All of this was revelatory and caught Mr Diamond off guard.

I have to say, that if he had not resigned yesterday, then I fear he would not have lasted much beyond these revelations, though we are yet to see them in print. Of course, had he not resigned, then perhaps the FSA would not have furnished Mr Tyrie with the concerns expressed on two different occasions.

What I can say is that, however acute these concerns, senior FSA officials said to me that the Libor scandal had not led to an additional “fit and proper” test.

Pointedly the former Barclays chief would not be drawn on the conversations between the Governor of the Bank of England and the FSA chief and his chairman last night. But he didnt deny or confirm that Agius had told him that regulators expressed concerns on Monday night.

As expected Diamond racked up the contrition over the Bollinger trader Libor fixing dudes: “reprehensible”, “awful” and when he started to read the trader emails in regulatory reports: “I got physically ill”.

But Diamond did reveal something remarkable. The much vaunted memo of a telephone conversation with Paul Tucker was not used to attack the Bank of England deputy governor.

Instead he felt that Tucker was warning him of concern from “Whitehall sources” that Barclays could not fund itself despite the bank being two days ahead of a major Middle east fundraising.

Mr Diamond felt that government figures, who were not Chancellor Alistair Darling, were thinking of nationalising Barclays. Did he think that Gordon Brown was on the cusp of nationalising Barclays?

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