Bob Diamond faces calls to resign over Barclays Libor scandal

The Barclays CEO is facing calls to resign after the firm was hit with fines of £290m for trying to fix the lending rates for competitive trading advantage.

by Michael Northcott
Last Updated: 19 Aug 2013

Bob Diamond is today facing calls from poltiicians and Barclays shareholders to resign after it emerged that during his days as head of Barclays Capital, staff routinely attempted to fix the rates at which banks lend to each other. Diamond and several other senior management figures have waived their annual bonus for 2012 after the scheme was uncovered by authorities. The practice means borrowers may have paid millions of pounds extra in interest for things like mortgages and loans. That’s definitely a naughty trick, and unlikely to do any favours for the banking community’s reputation.

The two interest rates that appear to have been manipulated are the London Interbank Offered Rate (Libor) and the Euro Interbank Offered Rate (Euribor). Both rates affect the global financial markets and have repercussions for the value of trillions of pounds worth of agreements and deals between financial institutions. US and UK authorities said Barclays appeared to have been manipulating Libor since around 2005, and such a scheme could even have meant that savers received less interest on their savings than they should have under normal circumstances. 

The normal routine is that the British Bankers’ Association and the European Banking Association publish their rates each day (Libor and Euribor), which are normally an average of estimated inter-bank lending rates that the main banks give to them. The dodgy scheme happened because derivatives traders at Barclays tried to get the ‘estimators’ to submit figures that would help the bank’s trading position and therefore make it a profit. That, by the way, is definitely foul play as far as the regulators see it…

The US Commodity Futures Trading Commission fined the bank $200m and a further $160m that will be paid as part of an agreement with the US Justice Department. Our native Financial Services Authority has also imposed its largest-ever fine, at £59.5m. Not a good day for the four top boys at Barclays…

In a statement, Barclays said it had ‘received credit from the Authorities for its extensive co-operation,’ but somehow we reckon that just won’t cut it with the anti-banker sentiments swirling around at the moment. Diamond stood to earn around £17m this year with salary, bonus, long-term incentives and share options (the usual cocktail allowing bankers to earn the bug bucks). His colleagues Chris Lucas, Jerry del Missier and Rich Ricci have also gone to the board to forgo their bonus. Looks like this bit of interest rate jiggery pokery was obviously enough to jerk the sense of morality at Barclays high command into action. And for the FSA to bear its teeth for once…

But MT reckons this is only the beginning of a larger scandal in the financial sector. If Barclays have been doing it then sure as eggs there will be other culprits. Welcome to the next tranche of public outrage. The banking sector just cannot seem to get off the hook here...

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