In this third part of my interest in the economic, political and social implications of the LIBOR scandal while the focus is on the end game for Casino Bob Diamond the former Group Chief Executive of Barclays Bank, the roles of Chairman Marcus Agius, the Financial Services Authority and the Bank of England are also covered as a consequence of the hearings by them before the House of Commons Treasury Committee.
I want to begin by making brief pen pictures of the individuals and interests in reverse order commencing with the Bank of England, the oldest major central Banking body in the world and on whom the central Banks of most economically developed countries has been based.
The position and the role of the bank was significantly changed under the first Tony Blair Administration led by Chancellor Gordon Brown in making the Bank independent of the Treasury and direct Government control in relation to monetary policy something which had also been Liberal Democrat policy since 1992. The Bank sets the interest rate and takes other monetary measures (such as the so called Quantative Easing which is simply giving money to banks to enable them to increase their capital and therefore be able to increase the amount of lending to commerce) within the national guideline of an ongoing inflation target of 2.50% a year later revised down to 2.00% since the Consumer Price Index replaced the Retail Price Index.
If inflation undershoots or overshoots by more than 1% the Government has to formally notify the Chancellor why this has happened and state the action being taken.
Clearly the Bank which became a Limited Liability Company of the Government does not operate in isolation and maintains close links with the Treasury and the Financial Services Authority, other Central Banks and International Organisations Associated with Banking including the British Bankers Association. While the Bank therefore has had considerable Independent influence over the British economy and its financing it was and is still not a yet a Regulatory Authority although this is in the process of change.
The present Governor of the Bank of England Mervyn King serves on the Council of the Central European Bank. The Central European Bank functions directly on behalf of all the major European Economies in total 17 of the 27 EEC countries in the Euro zone but its Council involves the 10 other nations outside the Euro notably the UK and Sweden.
Mervyn King has taken the view that Banks had put profits before people and should take moral responsibility for their actions and should be allowed to fail. Alistair Darling criticised this approach in his memoirs and in a recent Mansion House speech he criticised Darling’s hostility to the Coalition’s new approach to Regulation which gives the Bank of England a major role in terms of Prudential Regulation.
The Governors views on the Casino immorality of the Big banks led them to making direct threat move their bases from the UK elsewhere if a more sympathetic figure to their interests does not replace him when he retires in 2013. They were said to be in favour of the present Deputy Governor because he is thought to be more amenable to furthering their interests which are expressed through the lobbying of government by the 150 committees of the British Banking Association and their Executive Council which is presently led by Chairman by Barclay’s Bank, Marcus Agius and where Barclay’s former Chief Executive was a powerful member, rather like the Rupert Murdoch chairing the Proprietor’s association with one of the leading lights of the PCC being the shaper creative Dacre.
It has also to be said that King told the Labour Government they did not have tough enough deficit plans and he has supported the Coalitions belief that the reduction plan needs to be continued and toughened if the long term position of the UK’s economy is to develop.
The Labour Government changed the self regulatory approach of the previous years of Tory administrations, by creating the Financial Services Authority in 1997 regulating banks, insurance companies, financial advises, mortgages and general insurance, excluding travel insurance between then and 2005 to bring order and stability within the agreed framework of growth having believed it had abolished the boom and bust cycle. However as I shall report the FSA has been charged several times with incompetence and being too close to those it was supposed to monitor and when appropriate control.
In June 2010 the Coalition announced that the FSA authority was to be abolished and its function allocated to new agencies and the Bank of England. The Chief Executive of FSA Hector Santa had told the Treasury Committee on 9th March 2011 that Parliament should legislate to make the organisation accountable to Treasury Minister and to Parliament. At present the organisation is funded by the services it regulates and until now the money collected in fines was used collectively to maintain or reduce the levy in subsequent years. The Coalition has indicated that the Barclays and subsequent scandal fines should be paid to the Treasury. Sir John Gieve a Deputy Governor at the Bank of England and responsible for its Financial Stability is a non executive Board member of the FSA.
The FSA has been the subject of repeat criticism since its creation first for failing to take up the thousands of Consumer complaints about payment protection insurance and bank charges. The way it handled the collapse of Northern Rock and the Equitable Life Assurance Scandal is added to the criticism that it ignored warning signals leading to the collapse of Northern Rock and now it is under the spotlight in relation to the LIBOR scandal. It has been renamed by Private Eye as the Fundamentally Supine Authority.
The Chairman of the FSA Lord Adair Turner has also come in for criticism from Private Eye. He was chairman of Cambridge Conservative Association as well as President of the Union after which he worked for BP and then the Chase Manhattan Bank during which time he joined the SDP. As Director General of the CBI he supported joining the Euro which he later said was a mistake. Over the past decade he Chaired the enquiry into pensions, the Economic and Social Research Council, the Overseas Development Institutes Council and the Climate Change Council which he left this Spring. In 2008 he commenced his five year term as chairman of the FSA; Under his leadership he defended paying the 3000 staff of the Association a 15% annual bonus on top of their contracted salaries. At the same time he criticised the financial sector for giving excessive reward packages.
He appears a strong, self confident and assertive chairman whereas the influential and well connected Chairman of Barclays Bank, Marcus Agius, communicated as a traditional English gentleman type of Chairman. Like me his background is one of part Maltese descent and also with the military, however with this any similarity appears as demonstrated by his appearance before the House of Common Treasury Committee. He is just the kind of individual who would be invited to join the Knights of Malta and Freemasonry although his good connections come from his wife, a member of the Rothschild’s family.
Marcus obtained an interesting Degree at Cambridge combining mechanical sciences and economics and the economics side led him to the famous Harvard Business school for his Masters. At the age 26 (born 1944) he joined the Investment bank of Lazard in London and after achieving several senior positions he was appointed the Chairman of the London branch in 2001 and a year later Deputy Chairman of the global company. He was also appointed as a non executive Director to the Board of the British Airports Authority in 1995 becoming Chairman from 2002 to 2006.
It is evident from the facts that when he joined Barclays Bank in 2006 as a non executive director it was with the intention of preparing to take on the job as Chairman to succeed Matthew Barrett early in 2007. His salary is believed to be in the order of three quarters of a million pounds. I am not aware if he also shares in the bonus or other benefits in his rewards package but it is difficult to believe that any Chairman can gain respect and control his Executive Directors if his reward package is less than theirs.
Marcus has also served as a non executive Director of the BBC’s Trust Board since 2006 and is Chairman of the Kew Foundation serving as a Trustee of the Royal Botanical Gardens. The interest in Gardens appears to stem from his involvement with the British Rothschild’s Family Estate, Exbury Gardens in Hampshire through his marriage to Katherine, daughter of Edmund de Rothchild.
His background and record is in complete contrast with that of the American Bob Diamond who was already established as the Shaper Leader of the Investment Trading expansion which had taken the bank to one of the major players in this market. It is an interesting question if Marcus was canvassed as the Chairman in order to act as break on the bank’s Los Vegas style activities or he was considered the ideal kind of chairman to let it flourish?
While using creative and shaper creative executives was all the rage in the mid 1980’s when I attended one of the top International senior management centres in the UK it was considered essential to have a get rid off strategy at the ready if the behaviour became negative for the organisation. As I had discovered after finishing top of the class at the British Olivetti training course in the later 1950’s the only ethical consideration was the sale and nothing but the sale and no one was concerned how you got it, only that you did.
So I am suggesting that as long as Bob Diamond and those like him delivered what was required of them by their organisation and furthered the interests of Government their methods were not just accepted but encouraged and rewarded for as the European boss of 3M’s confided after a good meal evening session on the International management course, a handful of such individuals account for most of the developments which led to the corporation creating new multi million ventures compared to the more pedestrian approaches of the rest of the team.
Bob Diamond was born in the USA one of nine children with Irish and Scottish Catholic background parents, second generation immigrants and who were both teachers. After a BA in Economics he became first in his MBA class. After a short career as a Lecturer he joined Morgan Stanley rising to the post of Managing Director and head of the fixed income trading division. 15 years later in 1952 he became Chairman, President and Chief Executive Officer of the CS First Boston Pacific for the Pacific Region based in Tokyo.
He joined Barclays on July 4th 1996 and as mentioned is recognised as playing a leading role for the bank switching what had been a traditional high street banking enterprise into the new era of Investment banking. In 2008 he was behind Barclay’s acquiring key assets of Lehman Brothers when the bank collapsed in 2008. It was therefore not surprising that when a new Chief Executive of the whole world wide banking group was required he was appointed with enthusiasm and in accordance with standard procedure he was interviewed by the Financial Services Authority and in a letter to the Barclay’s Chairman Marcus Agius the Regulator stressed that in addition to assessing his competence to take on the role they had to ensure that an appropriately robust and rigorous appointment processes is undertaken by the firm. Given subsequent events it appears that there was strong support for him from the leading shareholders as well as from other members of the Executive Management Team although the position of the other non executive Directors particularly the Independent Non executive Director has not been disclosed.
Chairman Marcus indicated to the Treasury Committee that he had no knowledge until the weekend before his appearance that according to the Financial Times that a previous Barclay’s Bank Chief Executive, Martin Taylor, regretted not sacking Marcus because Traders under his control are said to have exceeded the limit on making substantial loans to Russia by declaring them as Swiss or USA area loans. When the loans defaulted the bank incurred massive losses which would not have happened if the risk liability rules had been followed. The Financial Times is traditionally conservative in protecting its reputation for objectivity and accuracy and would not have published the Taylor article without being confident about the implication of what was being said.
Even more worrying was the admission to the Treasury Committee this week that the Independent non Executive Director had said that he was never made aware of the concerns that had been expressed by the FSA in 2010 at the time of the appointment as Group Chief Executive and again when the FSA followed up their meeting with the Board in February of this year with a carefully worded letter demanding major changes in the management culture and approach from the top.
Understandably the Commons Treasury Committee became collectively angry when they discovered that Barclay’s Bank or the FSA had not provided copies of the key correspondence before they interviewed Bob Diamond and expressed amazement when both parties defended their position by saying they were not asked, which as the Chairman explained can one be expected to ask for what we do not know exists? It is for those called to the inquiry to provide all the relevant documentation and information. However it is clear that over several decades now Barclays has gone out of its way to misrepresent and mislead and for which all those directly involved require the severest censure.
In the light of subsequent event the 2010 letter is illuminating. I accept that the 15th September letter under the name of FSA Chief Executive Hector Sants who announced his resignation in March which took effect in June, is open to different interpretations, but not the spin which Chairman Marcus advanced at the Committee after admitting he had been coached by the team of legal and presentational advisers as had Bob Diamond a few days before and which therefore accounted for similarities in what was being said to the Commons Committee.
The first point made the 2010 letter is that the FSA expected Mr Diamond to develop a close, open and transparent relationship with the regulators in the UK and globally. It had already been identified that this would require an increased level of engagement from Mr Diamond and this expectation had been made known to him. It was also assumed that Mr Diamond would be based in the UK.
The succession plan had Rich Ricci as co Chief Executive with Jerry Del Messier and the FSA wanted assurance that the managerial structure would remain effective. The FSA wanted appropriate clarity that Mr Diamond would exercise oversight of their responsibilities and that as CEO for the Group Mr Diamond would provide independent challenge to the work of the co Chief Executives. (we now know this comment was apposite in relation to the failure of Bob Diamond to check what had happened when he directed Jerry Del Messier to lower their LIBOR returns following a conversation with the Deputy Governor of the Bank of England.
Thirdly the FSA wanted assurance that Mr Diamond would set the right culture, risk appetite and control framework across the entire organisation and that a prudent balance was struck in delivering the group’s financial and strategic objectives and desirable consumer outcomes, alongside of broader reputational risks for the group.
The final point made by the FSA was that Mr Diamond’s experience had been on the capital investment side, and which some would argue was in Casino banking and therefore he had a relative lack of direct retail banking experience. The FSA appreciated the depth of the experience of other Executive Committee members and the Regulator said it would look to be satisfied that the required focus on the retail banking business and consumer outcomes is maintained by him. The offer was made to discuss these points in greater detail.
From what Chairman Marcus said to the Commons committee the impression was that the letter was regarded as a standard advisory on the making of a new appointment and looked to the future rather to be regarded as criticism about an aspect of his role and culture setting in the past. It remains unclear to what extent the letter was discussed with other Non Executive Directors or shared with the key shareholders before the appointment was confirmed, or if any action was taken by the Chairman at the time of the appointment or if he went over the issues with the Chief Executive as part of the formal review of his work undertaken in 2011 before his bonus reward package was agreed.
It is also not clear at what point in 2010 Marcus was advised of the formal investigation being taken by the FSA into the way LIBOR was being unlawfully influenced by Barclay’s Bank Corporately and I shall examine this further when also considering the role of the FSA and the Bank of England in this respect.
I want to next turn to the meeting of the Board of Barclays Bank in February of this year at which the FSA communicated its ongoing concerns about culture and approach of the bank on a number of important issues. There are again diametrically opposed viewpoints of what happened at this meeting. Both the Chairman and Casino BOB took the view that the concern was on how the bank would perform in the future and that whatever problems were being uncovered there was no direct criticism of the Group Chief Executive. This relaxed view appears to have been maintained even after the FSA Chairman met Marcus, following up the meeting with an extraordinary letter.
Mr Turner, the FSA Chairman underlined that the purpose of the meeting had been to state the cumulative concerns arising out of the investigation in the LIBOR manipulations. underlining that all the specific matters would be taken up by the FSA Supervisory team directly with those concerned at appropriate levels within Barclays. This in my judgement meant that the FSA was in effect taking over control of the Bank in terms of the matters where there was continuing concern and was not trusting the internal management to ensure that things were now right or were being put right.
They had commenced in what Marcus regarded as old news in terms of previous communications between the FSA and Barclays. The first was that Barclays had created a convoluted way of portraying a favourable accounting result. The implication of this comment is that under Mr Diamond and the Chairmanship of Mr Agius the bank had been concerned more with presentation than substance and this was evident to me as it was to the Commons Committee when the evidence of Mr Diamond was re-examined against the contents of this letter.
The other old news was a technical point which I understood to mean that Barclays had adopted an aggressive approach to acceptable spectrum of valuations.
The first of the new points was that Barclays had not been fully transparent about a matter causing the FSA unnecessary time consuming and therefore costly problems. This point needs to be viewed in relation to the 2010 letter.
The next point was blanked out by Barclays on the grounds that it concerned only a matter of commercial significance to the Bank. Mr Agius explained that the redaction had been agreed with the FSA and in discussion with the Treasury Committee staff. It is puzzling that this was not communicated to the Committee Chairman and led to Mr Fallon MP raising the issue on behalf of the Committee.
The third issue also indicated a protracted attempt by Barclays to get issues resolved in their interests and which inefficiently used up FSA resources and goodwill.
Fourthly that Barclays under Mr Diamond had confused and attempted to potentially mislead over a separate presentation of an issue and that Barclays attempted to spin its message in an unhelpful fashion.
The behaviour of the bank in relation to its tax position had created a lack of trust in Barclay’s approach to tax, regulation and accounting. While accepting that it was the job of the management of the bank to make its case and express its position in the most favourable light, the FSA Chairman made the point that Barclays continued to have the tendency to seek advantage from complex structures or favourable regulatory interpretations and that he and his Board were urged to encourage a tone of full cooperation and transparency between all levels of the Bank’s management and the FSA.
Mr Turner concluded that he appreciated from their conversation that Mr Agius took the matter seriously. The final sentence is blacked out which is puzzling and merits explanation and revealing to the Chairman of the Committee although it appears covered by the commercial interests explanation.
I remain unclear about the extent to which this letter was shared with Casino Bob who gave the impression to the Committee of not knowing about its serious nature. The Chairman could only go as far as saying that he would have arranged for Casino Bob to receive a copy although in fact there has only been a discussion of the issues raised by the letter with the Board. It is not clear what direct contact he then had with his group CEO about the letter and as previously stated the Independent non executive director has expressed concern that he was advised of the seriousness of the issues.
It appears from this that the Group CEO had no hand in helping the Chairman to draft his response to Lord Turner sent 18th April 2012 because he appeared to be ignorant of the nature of its contents although the Chairman said he would have arranged for a copy to be sent to Casino Bob even if the matter was separately discussed outside of he Board meeting. I would expect the Commons Committee to regard this aspect one of negligence by the chairman of the Board
Marcus in reply accepted the need for a strong, open, cooperative, transparent and open relationship with the FSA and all the global regulators but he also explained the banks position on all the matters covered. The letter underlined the point that at the February Board meeting the FSA had excluded Casino Bob and the Chief Financial Officer Lucas from their adverse comments. Mr Agius said that when Bob Diamond had responded to questions at the committee he had referred to this endorsement made by the FSA representative at the February meeting and not to the April letter in much the same way that Mr Diamond was accurate in saying that he had not considered resigning over the weekend.
The House of Committee spent a significant amount of time questioning Casino Bob on the reasons for his departure, after which the issue was raised with Chairman Marcus and then the Chairman of the FSA and then the Governor of the Bank of England.
Chairman Marcus admitted the bank had been shocked by the public outcry to the announcement that corporately the institution falsified information resulting in individual and corporate greater profits as well as financial damage to others which will be the subject of substantial civil litigation. He had held a meeting with the Chairman of the FSA on the Friday after the Wednesday publication of the reports. I suspect that the Thursday evening Question Time on BBC 1 had a profound affect on the approach of National Politicians and the Regulators.
Lord Turner told the Commons Committee that he had left Chairman Marcus in no doubt that given the history of concerns about the management style and approach of the Chief Executive and the gravity of the offences committed by staff at the Bank and the International response, it was unlikely that confidence in the bank could be restored while Casino Bob remained the Group Chief Executive Officer. Lord Turner, as had Chairman Marcus, stressed that the Regulator had not ordered or insisted that the Casino Bob left but made the bank aware of the problem which they now faced.
Chairman Marcus appeared to be frank and open when he said he had gone back and consulted the non executive directors on the board and in particular the firm which represented the corporate shareholders and that the overwhelming opinion was the Casino Bob should stay, In this circumstance Chairman Marcus decided that he should resign and notified the appropriate authorities including the Governor of the Bank of England, the Chairman of the FSA and Whitehall of his decision. Following this Bob Diamond had told the Commons Committee that he had spent the weekend dealing with this development and prepared a document for internal circulation to staff within the bank.
The development was made public on the Monday and Chairman Marcus was contacted to attend a meeting with the Governor of the Bank of England at 6pm. Members of the Committee questioned the Governor on the justification for his intervention given that he was not a regulator and had not participated in the investigation into what had happened and led to the damning reports and fines. He defended his action on the grounds of the International reaction as well as supporting the FSA Chairman that what happened and in relation to previous matter indicated a failure to establish the right culture at the bank and that Casino Bob was not the man to bring about the radical change that was now required.
The Chairman had gone back and contacted the Non Executive Directors and broke the development to Bob and left him to consult his family and consult his legal and other advisors. Chairman Marcus was confident Bob had got the message and would do the right thing. Following agreement about his leaving package the decision was confirmed the following day and announced to the public.
Through Chairman Marcus, the FSA Chairman and the Bank of England Governor emphasised that the authorities had only advised with the outcome left to the Bank and to Casino Bob. The Governor and the Regulator resisted the suggestion of the Commons Committee that Marcus had been handed a revolver which he had turned on himself so they had come back and insisted that the Chairman then redirect the weapon at the intended target. Marcus had then spent the night working out with the Non Executive Directors the best way to move forward so he had withdrawn his immediate effect notice and was staying on until a new Chief Executive and a new Chairman could be appointed. Chairman Marcus had felt the necessity to consult the authorities about the proposed interim arrangements before going ahead which prompted observation that in effect the authorities had taken control of the bank albeit briefly. All this appeared to have made Bob angry and perplexed but which casts considerable doubt over his openness and directness when appearing before the Commons Committee something which the Chairman and Committee are taking very seriously.
Attention had turned on his leaving package which at first Chairman Marcus implied it was a payment of six months salary in lieu of notice but that this was amended to one year and in the inclusion of the £.7m payment in lieu of pension as Bob had negotiated in which he provided his own pension to which the Bank made their substantial contribution approximately 40% of his basic salary. This total was £2 but the larger bonus package said to have brought up the total to £20 million was not accepted.
There was also a lack of clarity if this meant that Bob had left or was still on the official payroll taking “gardening leave.” It was no clear if Bob had left and the payment twice that in the contract was made out of goodwill because of his previous service to the bank or in fact it was because he would still be called up to assist the Bank with information in relation to the series of inquiries and court cases anticipated on both side of the Atlantic.
A key factor in forcing out Casino Bob was the issue of the Culture set by him on the trading floor and within the bank generally and whether thus culture had led to individual traders being open in shouting instructions to the LIBOR submitters or sending emails on their success in changing the rate in such a way that they were able to profit. It emerged at the Commons Committee that no one is still sure how individuals gained or went to the length which they did. One argument is they would not have done so systematically, at one point every couple of days, had they not made personal profit. The extent to which it was done is also questioned because those identified had come through the search of millions of emails and individuals admitting what had happened. However the extent of informal communication potentially involving others has not been ruled out. What is agreed is that Barclay former employees who moved to other banks appear to have conspired to fix the rate and therefore they were more effective or the extent to which non Barclay employees in other banks were involved.
The Commons Committee also raised the issue of internal auditing and compliance and whether those responsible ever sat on the trading floor to observe what went on. I have personal experience of what used to be old system of monitoring going back to the 1950’s.
When nineteen years I worked as a cashier in the Croydon CBC Treasurer’s department and could not go home until I had balanced my cash till against the cash income from motor vehicle licences renewals received during the day. Two members of the Internal Audit had an office in the same building and it was not unknown for them to pop out when I and the two other cashiers were balancing up and see what we were doing.
However the attention to sticking to rules and regulations could be taken to extraordinary length. There was a member of staff in the former West Riding of Yorkshire Children’s Department who if she spotted what appeared a questionable mileage claim by an officer first used a device to measure distance on a route map and if still not convinced actually retraced the route in her car with her husband at weekends in order to ensure that she was not authorising an inappropriate expenses payment.
Moreover as an Assistant County Children’s Officer, one of three each responsible for over 600 hundred children in care and all the child care homes within my area which covered the Doncaster, Barnsley and Rotherham local authority areas I received each day over 100 written requests from heads of Homes and each of my three Divisional Directors and their staffs to approve expenditure which had been delegated to me following the arrival of the second Children’s officer appointed since the department was set up in 1948, as well as professional decisions about the future welfare of the children
Each application for an item of clothing, or expenditure on a child was accompanied by the headquarters full copy file. Before the arrival of the new Children’s Officer the files of decisions not delegated to the Children’s officer were loaded in laundry size wicker baskets and taken down to County Hall to be available to the Children’s Officer and his admin Assistant to seek political approval. The pile of files filled his office beforehand and could be used as seating.
I was therefore not unsympathetic when a subsequent Treasurer in another other local authority in the 1970’s argued at the Management Team that such monitoring and compliance systems were costly and ineffective because they failed to discover the worst offenders and this as with all major criminality goes to the nub of the situation which Barclays and other banks now face.
It has emerged that a new approach to regulation has been adopted by Barclays and one assumes all the banks involved including compliance officers making unannounced visits to observe the rate setting notifications.
However at the Inquiry Chairman Agius disclosed that a senior Executive at the FSA had told him that the bank was top of the class in relation to their compliance system. The FSA Chairman while disclosing the senior officer had left shortly afterwards, albeit for reason unconnected, explained that she had referred to their agreed system on paper not to how it worked in practice. Nevertheless what she said was used by the Bank to defend itself from criticism.
As previously reported the problem was that no one in the industry or government had considered that LIBOR could or would be manipulated given its previous stability. It was only after the collapse of Lehman and the sub prime discoveries did the LIBOR mechanism stop being a litmus paper test of a bank’s liquidity and overall book balancing. And indeed when the issue was first raised back in 2008 no one then considered there was a problem which involved intentional unlawful activity.
The amazing thing is that in December 2007, it was a Barclay’s compliance officer who contacted the British Bankers Association and Financial Services Authority to complain about the LIBOR rates submitted by other banks failing to mention that its own submissions could be questioned, saying they were within a reasonable range!
The officer alleges the he gave his view of the position at Barclays and the FSA agreed that the approach seemed sensible in the prevailing circumstances. Across the Atlantic a Barclay employee responsible for setting the dollar rate contact the USA regulatory authority to advise that their Bank was not setting “honest” rates, that is some four and half years ago. He also advised his superior in writing “We are therefore being dishonest by definition and are at risk of damaging our reputation in the market and with the regulators. Can we discuss urgently please? It was not until three months later on April 11 that that an official of the New York Fed Bank contacted Barclays about the problem of LIBOR reporting. The officers explained why Barclay was underreporting and five days later the Wall Street Journal questioned the integrity of LIBOR. According to the American Regulator a senior treasury Manager at Barclays informed the British Bankers Association that his bank was not making accurate submissions saying they were not the worst offender,”We’re clean but we are dirty clean rather than clean clean.” The Representative of the British Bankers Association replied no one is clean clean. Barclays was contacted by the BBA to express its concern saying that if true the behaviour was unacceptable.
In May 2008 officials from The New York Federal Reserve Bank notified other US agencies of their concern following a meting to discuss he problem. This included a direct meeting with US Treasury Officials followed by a written report. It is difficult to believe the US Treasury did not contact its London Counterpart. The New York Fed had direct contact with the British Bankers Association on the matter. At Barclay the decision was formally taken to tell the media that the bank had always quoted accurate and fair LIBOR and had acted in defiance of the market.
It is also recorded that the Governor of the Bank of England had discussed the issue with the head of he New York Fed at a gathering of central bankers and then was sent a list of proposals to tackle the problem which included the potentially cover up suggestion of no longer disclosing the identity of the banks which submitted the highest and lower rate submission on the day which in effect meant not disclosing as previously all the identities of the individual submitters. These recommendations were passed to the British Bankers Association who owned the separate LIBOR setting company. This all happened before the collapse of Lehman Brothers,
The Deputy Governor at The bank of England told the Treasury Sub Committee that Barclays was considered the next bank in line to Lehmans at risk. Barclays then tell the New York Fed that the rate had become rubbish and this led to the now infamous conversation between the Deputy Governor and Casino Bob on October 29th 2010.
Bob usually made a written note of the conversation and which he passed to Jerry Del Messier. Before this he told Jerry that he had been told to lower its rate submission because of pressure from Whitehall. Del Messier interpreted this conversation as an order and effectively told the trader to lower the rate, unwittingly, giving them authority to do what they had been doing for personal gain but now for the good of the bank on official advice. They lowered the rates to become within the pack.
The British Bankers Association then issued new guidance on how LIBOR should be set in the future as a draft with the final document circulated on 16th July the follow year (2009), seven months later. Barclays then commenced to improve its systems and control but ignored the BBA document. This was prior to the Marcus becoming the Chairman. It was not until June 2010 that Barclays formally told submitters not communicate with those in other banks and to report any attempt within the bank to influence their submission. It also appears Barclays Executive Managers, Directors and Compliance officers did not conduct an internal investigation until the FSA inquiry commenced.
It is also known that late in 2011 four Royal Bank of Scotland Staff were sacked because of their alleged roles in LIBOR fixing.
In his evidence to the Commons Treasury Committee, despite all this and one suspect a lot more going on, including the awareness by the Treasury and Vince Cable and his Department and if not why not, the Governor of the Bank of England claimed ignorance of unlawful wrong doing by anyone until he read of this in the published reports along with everyone else. The Chairman of the FSA also denied they had been slow given that the issues were first raised in 2008 and they did not commence their inquiries until 2010.
I can understand why Cameron and Osborne do not wanting Leveson style Inquiry which could reveal the extent of the collusion between authorities to effect a cover up, or more likely to prevent an escalation of the lack of confidence in the banks based in London and the position of London as a premier banking and financial centre. There is now news of another British bank being accused in the USA of drug money laundering and enabling financing to bypass UN and USA approved sanction including in relation to Iran.
I also thought we had a classic admission of truth that if you or I owe a bank £100 it is our responsibility and we face mounting interesting payments, but if you owe £100 million this is the banks problem and one current approach is just to write off so as not to affect the capital provision of the bank in its annual accounts.
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