4 Jul 2012

Bob Diamond: no ‘instruction’ to alter borrowing rates

Former Barclays chief executive Bob Diamond tells MPs he did not believe he was “instructed” by the Bank of England to submit lower borrowing rates during the 2008 financial crisis.

Speaking to the Treasury select committee, Mr Diamond, who resigned on Wednesday, said he had been “physically ill” when he read emails written by Barclays traders who had fiddled the bank’s borrowing costs.

He was asked about a memo of a conversation he had held with Bank of England Deputy Governor Paul Tucker and was quizzed about whether he thought Mr Tucker wanted Barclays to alter the declarations it made as part of the process used to set the Libor inter-bank lending rate. This would have given the impression Barclays’ borrowing costs were lower than they really were.

I’m sorry, I’m disappointed and I’m so angry. There’s no excuse. This was wrong. Bob Diamond, former Barclays chief executive

But Mr Diamond said he had not felt he was being instructed to do this – “I didn’t feel it was an instruction” – and could not explain why his colleague Jerry del Missier had formed the opposite impression. He put it down to “misunderstanding and miscommunication”.

‘Senior figures’

The memo, written by Mr Diamond, also says that Mr Tucker had told him that “a number of senior figures within Whitehall” were worried about the rates at which Barclays was borrowing money from other banks.

He was asked who these figures were and said he assumed they were ministers, but declined to name them. Asked by Channel 4 News if he was responsible, Lord Myners, who was City minister in the Labour government, said: “No, it was absolutely wasn’t me.”

Lord Myners said a judge-led inquiry was needed to look into the issue and banking culture. “The chancellor said this week that we know what went wrong. I don’t think we do know what went wrong. I don’t think we know what happened that turned Barclays from a Quaker-led, prudent, trustworthy bank 30 or 40 years ago into what it is now.”

Mr Diamond spoke of his fears, after the nationalisation of RBS and Lloyds in 2008, that Barclays’ high borrowing costs could convince the government that it also needed to be taken over, even though it was able to fund itself privately.

“There was a perception in Whitehall that our rates were high,” he said. “Whitehall was told Barclays had the highest Libor. They would think we couldn’t fund and must nationalise the bank.”


Mr Diamond said he decided to resign “prevent the damage to the reputation that has happened over the last week”. He said when he read emails written by Barclays traders who were fiddling rates in the run-up to the financial crisis, he was “physically ill”.

He added: “I’m sorry, I’m disappointed and I’m so angry. There’s no excuse. This was wrong. I’m not happy about it.”

Bank shares fell on Wednesday amid fears that other lenders will be implicated in the rate rigging scandal.

Mr Diamond’s exit followed revelations in a report by the Financial Services Authority that Barclays staff had colluded in trying to rig the benchmark Libor index, the rate at which banks lend to one another.

His much-anticipated appearance was expected to be explosive, especially since the release of the memo during the banking crisis in October 2008.

It suggested Mr Tucker had said that Barclays’ inter-bank borrowing rates did not always need to be as high as they had been.


Barclays was fined a total of £290m by United States and British regulators for attempting to manipulate Libor between 2005 and 2009.

Before Mr Diamond’s appearance, Mr Tucker said he would like to appear in front of the committee “as soon as possible” so he could set out his own version of events.

In the Commons, David Cameron said bank executives who were sacked or forced to resign should not be entitled to any severance payments.

“It would be completely wrong if people who were leaving under these circumstances were given some vast pay-off. It would be completely inexplicable to the British public and wouldn’t be right and I very much hope that doesn’t happen.”


Mr Cameron used strong language to describe the possible effects of the attempts to rig Libor, saying: “It is outrageous, frankly, that homeowners may have paid higher mortgage rates and small businesses may have paid high interest rates because of spivvy and probably illegal activity in the City.”

He and and Labour leader Ed Miliband clashed over the banking inquiry the government is proposing.

Mr Miliband asked: “Why is it right to have this judge-led approach to the scandal in the Press, but wrong for the scandal in the banks?”

The Prime Minister said the Leveson inquiry followed a series of unsuccessful investigations into the media, whereas there had already been a “very successful” inquiry by the US Department of Justice and the Financial Services Authority into the banks.

The government is proposing a parliamentary inquiry headed by Treasury select committee chairman Andrew Tyrie. There will be a vote in the Commons on the issue on Thursday, with Labour arguing for a judge-led inquiry into Libor rigging and the culture and practices of the City.