29 Jun 2012

Bank of England governor criticises banking culture

As the Governor of the Bank of England launches a scathing attack on banks, Bob Diamond, the embattled chief executive of Barclays Bank, says he will not resign.

Speaking at the Bank of England’s financial stability report news conference, Mervyn King launched an attack on the culture of the banking industry.

Mr King criticised banks for “excessive compensation”, “shoddy treatment of customers”, and “deceitful manipulation of one of the most important interest rates”.

King said the revelations of the past few days were further evidence for the need to separate retail banking from “casino” investment operations.

He said: “I think it is very clear now that those two cultures are completely different, and they need to be separated.”

However he declined calls for an inquiry to be set up into the scandal, saying the Vickers Review had already made the recommendations necessary to reform the structure of the banking system.

No resignation

Speaking at a meeting of analysts at US investment bank Morgan Stanley, Barclays chief executive Bob Diamond announced his decision not to resign despite calls from senior politicians that he step down over the attempted manipulation of LIBOR by staff at the bank.

The announcement follows Mr Diamond’s acceptance yesterday that he will attend a Treasury Select Committee meeting to face questions on the misconduct at Barclays.

In an open letter to chairman of the treasury committee, Andrew Tryie MP, Diamond said: “I am determined that Barclays plays its role as a full corporate citizen, acting properly and fairly always, and contributing positively to society in everything that we do.”


In a further blow to public trust in banks, it emerged that Barclays, HSBC, Lloyds and RBS had agreed to compensate thousands of business customers after the FSA found they had mis-sold specialist insurance on loans.

The problems centre on the sale of interest rate swap arrangements (IRSAs), which may have been sold as protection – or to act as a hedge – against a rise in interest rates without the customer fully grasping the downside risks.

Banks sold around 28,000 interest rate protection products to customers since 2001, the FSA added.