Barclays chairman quits over rate-fixing scandal
Source: Agencies |
July 3, 2012, Tuesday
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Print Edition
Print Edition
BARCLAYS Plc chairman Marcus Agius quit yesterday, saying "the buck stops with me" after an interest rate rigging scandal that has dealt "a devastating blow" to the bank's reputation.
Agius, chairman of Britain's third biggest bank for 5-1/2 years, is the first major scalp from the scandal, which is likely to draw in more banks and could equally embarrass regulatory authorities.
But his resignation did not take the heat off chief executive Bob Diamond, who is also under pressure to go.
"The buck in Barclays stops with Bob Diamond, and it is Bob Diamond who must accept responsibility," said John Mann, a Labour politician who is part of a panel of lawmakers who will grill Diamond tomorrow and Agius on Thursday.
"He (Diamond) must resign. He's got to go. There is no role for people like him if banking is to be trusted again in this country and if British banking is to restore its tarnished reputation in the world, which of course is of great importance to our economy," Mann said on Sky News.
Prime Minister David Cameron has called the scandal "extremely serious" and said management had "some big questions to answer." Authorities also ordered a review into the working of a key lending rate between banks.
The Barclays affair comes at a time when banks in Britain, already under fire for their role in the financial crisis, are facing a new wave of public outrage. A technology problem at Royal Bank of Scotland shut millions of customers out of their accounts last month, and evidence has emerged showing banks mis-sold financial products to small businesses.
Diamond and Agius have also faced calls from some shareholders to resign after Barclays was last week fined US$453 million by British and US regulators for submitting inaccurate submissions on the Libor interest rate.
Several of the bank's largest investors - including Standard Life Investments, Scottish Widows Investment Partnership and Fidelity Worldwide Investment - have so far resisted calls to comment on Diamond's future, at least until after his appearance at the parliamentary committee hearing.
Smaller shareholders, however, were more robust in their demands for the CEO to take responsibility.
"I still think it is going to be hard for Bob Diamond to keep his job. I don't think he has built up enough shareholder goodwill in the past to be able to ride this one out," said a top 25 investor in the bank, who asked not to be named.
Barclays has admitted that some of its traders attempted to manipulate the setting of the London interbank offered rate (Libor), which is used worldwide as a benchmark for prices on about US$350 trillion of derivatives and other financial products.
"Last week's events - evidencing as they do unacceptable standards of behavior within the bank - have dealt a devastating blow to Barclays reputation ... The buck stops with me, and I must acknowledge responsibility by standing aside," Agius said in a statement.
"I am truly sorry that our customers, clients, employees and shareholders have been let down."
Lawmakers are likely to quiz Agius and Diamond on what the Bank of England and other regulators knew about the rate-rigging.
Details in documents released by US authorities last week could prove embarrassing to the BOE, after sources said a key conversation held in October 2008 cited in the documents was between Diamond and BOE Deputy Governor Paul Tucker.
Some people at Barclays mistakenly believed the bank had been granted permission to submit artificially low Libor estimates after that conversation, the documents released last week showed.
More than a dozen other banks are being investigated in the long-running global probe by authorities in North America, Europe and Japan, including Citigroup, HSBC, UBS and RBS. Analysts and bankers expect more big fines.
"I wish I could say this was an isolated case," said Tracey McDermott, acting director of Britain's Financial Services Authority, referring to Barclays. "You will hear more on this in due course."
Barclays has admitted it sent artificially low estimates of its borrowing costs from late 2007 to May 2009 because it thought rivals were doing the same.
Barclays employees expressed their concern that Libor rates were being set too low to the British Bankers' Association, the FSA, the BOE and the Federal Reserve Bank of New York between November 2007 and October 2008, a US Department of Justice document said.
Agius, chairman of Britain's third biggest bank for 5-1/2 years, is the first major scalp from the scandal, which is likely to draw in more banks and could equally embarrass regulatory authorities.
But his resignation did not take the heat off chief executive Bob Diamond, who is also under pressure to go.
"The buck in Barclays stops with Bob Diamond, and it is Bob Diamond who must accept responsibility," said John Mann, a Labour politician who is part of a panel of lawmakers who will grill Diamond tomorrow and Agius on Thursday.
"He (Diamond) must resign. He's got to go. There is no role for people like him if banking is to be trusted again in this country and if British banking is to restore its tarnished reputation in the world, which of course is of great importance to our economy," Mann said on Sky News.
Prime Minister David Cameron has called the scandal "extremely serious" and said management had "some big questions to answer." Authorities also ordered a review into the working of a key lending rate between banks.
The Barclays affair comes at a time when banks in Britain, already under fire for their role in the financial crisis, are facing a new wave of public outrage. A technology problem at Royal Bank of Scotland shut millions of customers out of their accounts last month, and evidence has emerged showing banks mis-sold financial products to small businesses.
Diamond and Agius have also faced calls from some shareholders to resign after Barclays was last week fined US$453 million by British and US regulators for submitting inaccurate submissions on the Libor interest rate.
Several of the bank's largest investors - including Standard Life Investments, Scottish Widows Investment Partnership and Fidelity Worldwide Investment - have so far resisted calls to comment on Diamond's future, at least until after his appearance at the parliamentary committee hearing.
Smaller shareholders, however, were more robust in their demands for the CEO to take responsibility.
"I still think it is going to be hard for Bob Diamond to keep his job. I don't think he has built up enough shareholder goodwill in the past to be able to ride this one out," said a top 25 investor in the bank, who asked not to be named.
Barclays has admitted that some of its traders attempted to manipulate the setting of the London interbank offered rate (Libor), which is used worldwide as a benchmark for prices on about US$350 trillion of derivatives and other financial products.
"Last week's events - evidencing as they do unacceptable standards of behavior within the bank - have dealt a devastating blow to Barclays reputation ... The buck stops with me, and I must acknowledge responsibility by standing aside," Agius said in a statement.
"I am truly sorry that our customers, clients, employees and shareholders have been let down."
Lawmakers are likely to quiz Agius and Diamond on what the Bank of England and other regulators knew about the rate-rigging.
Details in documents released by US authorities last week could prove embarrassing to the BOE, after sources said a key conversation held in October 2008 cited in the documents was between Diamond and BOE Deputy Governor Paul Tucker.
Some people at Barclays mistakenly believed the bank had been granted permission to submit artificially low Libor estimates after that conversation, the documents released last week showed.
More than a dozen other banks are being investigated in the long-running global probe by authorities in North America, Europe and Japan, including Citigroup, HSBC, UBS and RBS. Analysts and bankers expect more big fines.
"I wish I could say this was an isolated case," said Tracey McDermott, acting director of Britain's Financial Services Authority, referring to Barclays. "You will hear more on this in due course."
Barclays has admitted it sent artificially low estimates of its borrowing costs from late 2007 to May 2009 because it thought rivals were doing the same.
Barclays employees expressed their concern that Libor rates were being set too low to the British Bankers' Association, the FSA, the BOE and the Federal Reserve Bank of New York between November 2007 and October 2008, a US Department of Justice document said.
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