(From THE WALL STREET JOURNAL EUROPE)
It had been clear since the Libor rate-rigging disclosures emerged
last week that Robert Diamond would have to go. It shows how far
Barclays has lost its moorings that it took the board nearly a week to
realize its chief executive officer had become a liability.
Mr. Diamond had to go because he lost the confidence of U.K. financial
authorities. A bank of Barclays's size and systemic importance can't
operate without the support of its regulators and the government that
implicitly guarantees its balance sheet. Yet rather than act quickly
to remove Mr. Diamond, the board sat back. Meanwhile, Barclays spread
word that Mr. Diamond was threatening to disclose "embarrassing"
emails implicating the Bank of England in the scandal in what appeared
to be an attempt to intimidate his critics ahead of an appearance
before a U.K. parliamentary committee. It took direct intervention by
policy makers to bring Chairman Marcus Agius and the board to their
senses as the damage to Barclays and the U.K. threatened to spiral out
of control.
In fact, the damage already may have been done. Documents published by
Barclays on its website Tuesday raise questions about the possible
complicity of the central bank and other senior officials in attempts
by U.K. banks to lower the London interbank offered rate at the worst
point of the financial crisis.
A note of a phone call between Mr. Diamond and Paul Tucker, at the
time the Bank of England's executive director for markets and current
deputy governor, alleges Mr. Tucker had been questioned by "senior
Whitehall figures" over Barclays's high Libor readings and told
Barclays "it did not always need to be the case that we appeared as
high as we have recently."
The BOE denies it knew of attempts to rig Libor; Barclays accepts Mr.
Diamond didn't believe he had been "given an instruction" to report
lower readings. The instruction to report lower readings during the
crisis was given to traders by former Barclays Capital boss Jerry del
Missier after a conversation with Mr. Diamond. Mr. del Missier has
resigned as chief operating officer, less than a month after being
promoted and despite Barclays's earlier protestations that no senior
bankers were involved in rate-rigging. Even so, Barclays's evidence
raises the pressure on the BOE to clarify what discussions it had with
other banks still under investigation whose lowball Libor readings had
aroused Mr. Diamond's suspicions.
Meanwhile, it is hard to overestimate the scale of the crisis at
Barclays. Mr. Diamond built Barclays almost from scratch into an
investment-banking powerhouse. But he did so by taking large risks
with a balance sheet whose deposits were insured by the U.K.
government while at the same time angering London by pursuing an
aggressive approach on taxes and bonuses in defiance of policy makers.
That business model appears to have run its course.
Yet Mr. Diamond clearly enjoyed throughout his time the full support
of his board, which even up to his departure has shown a tin ear to
U.K. regulatory concerns, let alone public opinion. For this, Mr.
Agius, who resigned Monday but will remain until a new chief executive
is found, must bear a heavy share of responsibility. The idea he
should stay on and lead the search for Mr. Diamond's successor is
astonishing.
-- Simon Nixon
(END) Dow Jones Newswires
July 04, 2012 00:31 ET (04:31 GMT)
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