Barclays’ executives resign in the wake of banking scandal

Wednesday, 04 July 2012 07:51

Written by Editor

Bob Diamond, Barclays Chief Executive resigned after being with the bank for 16 years on Tuesday morning, with immediate effect, following the recent scandal and huge fines of £290 million imposed by regulators on the bank despite a memo he sent to Barclays staff on Monday saying that he had no intention of “falling on his sword” and that it was his responsibility to restore the bank’s reputation. Barclays are alleged to have given false information about the interest rates it had to pay to borrow money so it could paint a better picture of the bank’s financial health to markets. It was fined over claims that it had manipulated the Libor and Euribor Interbank lending rates between 2005 and 2009 when Mr Diamond was running the so-called “casino” part of the operation, Barclays Capital. A trail of emails and messages showed that traders broke the so-called Chinese Walls designed to avoid conflicts of interest within financial firms.
Last year Mr Diamond took a £2.7 million cash bonus despite widespread criticism that his pay failed to reflect the struggling performance of the bank Mr Diamond also appealed last year to a committee of MP’s to stop “Banker bashing” over the financial crisis.

John Mann MP said on Sky News yesterday morning that the arrogance of the bank following years of defrauding their customers over years beggars belief. They were not prepared to accept their responsibilities towards customers, businesses and the whole thing was about money, money, money and turning a quick profit.
Mark Kleinman, city analyst said that he can’t remember a boardroom being in such chaos and turmoil since the Marks and Spencer take-over affair. He added that Bob Diamond’s resignation must be a huge relief for Chancellor George Osbourne.

Lionel Barber, Editor of the financial Times, said in an interview that Mr Diamond was not culpable but was responsible and his position had become untenable. Asked if this would indicate a shift in the general banking systems, he said that the full blown enquiry into the banks is a very bad idea and that Barclays are a very important part of getting the British economy up-and-running again even though the bank didn’t make the right decision for Diamond to go last week as the bank were broadly supportive of him owing to a lack of clear succession.

Despite his resignation on Monday, Marcus Agius will take over as the full-time chairman and lead the search for successors to their positions, until someone else can be found for the position of CEO. In his resignation letter Mr. Agius said: “It has been my privilege to serve as Barclays chairman for the past six years. This has been a period of unprecedented stress and turmoil for the banking industry in particular and for the wider world economy in general. But last week’s events evidencing as they do unacceptable standards of behaviour within the bank have dealt a devastating blow to Barclays’ reputation. As chairman I am the ultimate guardian of the bank’s reputation. Accordingly the buck stops with me and I must acknowledge responsibility by standing down.” 

It is almost unheard of for a bank chairman and CEO to resign so close to one another as changes at the top of the board are very unsettling for the business and there will be some concern within the FSA about the way it has all be done which may be hugely damaging to the bank.

American Bob Diamond will be appearing in front of the Treasury Select Committee of MPs today and it is reported he will be telling the enquiry that he believed that the Bank of England had given him permission to falsify reports to Libor etc following a meeting  – something that the Bank of England will strenuously deny.
Barclays shares fell sharply on Tuesday morning following the resignations announcements but recovered later in the day.

The Government announced on Monday that there will be a parliamentary inquiry into the whole banking culture.

It has emerged that up to 12 other lenders in the UK and elsewhere in the world are under investigation and Andrew Tyrie, the chairman of the Commons Treasury Committee said that “banks were clearly acting in concert.”