–BOE King, FSA Turner Spell Out Their Role In Barclays CEO Ouster
–Libor Rigging Probably Massively Reduced or Thing of Past Now
–FSA: 7 Banks In Libor Probe; At One With BOE King On Barclays Change
LONDON (MNI) – Bank of England Governor Mervyn King and Financial
Services Authority chairman Adair Turner cooperated in pushing for
change at the top of Barclays, with King saying the bank’s board was in
denial over the regulators’ concerns about it.
In evidence to the Treasury Select Committee, which is probing the
Libor fixing scandal, the two spelled out how they hammered home the
message to Barclays’ board that its reputation had been damaged and it
needed to think about whether its then Chief Executive Officer Bob
Diamond should stay.
Their testimony runs counter to Diamond’s, with the ex-CEO
downplaying the regulators’ dissatisfaction with Barclays in his
evidence to the TSC.
King said Barclays’ board were simply in a “state of denial”
about the regulators concerns.
Turner said he told Barclays chairman Marcus Agius “that one thing
you’ll have to think about is whether Bob (Diamond) as a brand is just
holed below the water…”
“I said we are not giving you any direction, but this is the issue
you have to think about as a board,” Turner said.
In events in late June Turner said he and King governor had a
conversation about Barclays after he met Agius, and they agreed King
should also talk to the bank’s chairman.
“We had decided the appropriate line that we would all take at that
time,” Turner said.
The evidence to the TSC Tuesday follows a lengthy session with
Turner and other FSA officials Monday into Barclays and Libor.
In that session the top FSA officials revealed they believed
Barclays’ culture was too aggressive, it was ‘gaming the system’ and it
was critical to its future that it changed, according to top officials
at regulator the Financial Services Authority.
Turner said at that session that if Libor rigging was still going
on it was, at worst, on a massively reduced scale, but he highlighted
how the FSA had been blindsided on it in the past.
Tracey McDermott, who heads enforcement at the FSA, revealed the UK
regulatory body alone is investigating seven banks in its Libor probe
but declined to comment on other investigations abroad and said “We
don’t name individual institutions that are under investigation.”
Not all of the seven are UK banks, she added.
Turner and Andrew Bailey, head of the FSA’s Prudential Business
Unit, delivered a series of stinging criticisms about Barclays.
Turner set out the events at the end of June that lead to Diamond’s
ouster.
He said he had told Agius that the FSA had not concluded Diamond
was not fit and proper to head the bank but that the “board had to think
very seriously about the scale of change which Barclays had to make” and
that they needed to “persuade the world” that “they had changed
culturally.”
The FSA head said he then talked to King and the BOE Governor
repeated the message to Barclays about the need for change at the bank.
“I think we (he and King) were at one with the message that we had
to give to Barclays,” Turner said.
“The sort of words that we would frequently use was that there was
a culture of gaming and gaming us,” Bailey, also a BOE Director, said.
“A sequence of events over the years was giving us an impression
… about a pattern of behaviour which we felt was trying it on, gaming
the system” Turner said of Barclays.
Alongside oral evidence to the Treasury Select Committee from
Turner and Bailey FSA documents were also published.
A record of a February 2012 board meeting involving Bailey said
“There was a perception in the market and amongst some regulators that
Barclays was not all that it should be.”
It said the bank is “seen as relatively aggressive sometimes” with
staff at lower levels preferring to “engineer solutions rather than find
real answers to regulatory issues.”
The FSA said Barclays capital was “quite tight” on the basis used
by the European Banking Association and it was far from having plans in
place for resolution in the even of it running into serious
difficulties.
“The Board discussed the need to get the tone from the top right so
that all interactions with regulators are appropriates at all levels,”
it said.
Eventually, Diamond was forced out in the wake of the publication
of the heavy fine on Barclays over Libor rigging.
“I drew the conclusion that there was a problem with this
institution and the problem came from the tone from the top,” Bailey
said.
Asked if he meant Diamond, Bailey replied, “Yes”.
Turner was asked if he thought Libor rigging was still ongoing. He
said the rigging for profits dated back to pre-2007 and the ‘low
balling’ of Libor quotes to protect banks’ reputation related to the
height of the financial crisis.
“My strong suspicion is that if it is going on it is going on a
massively, massively reduced scale,” Turner said.
“From early 2011 we were drawing the attention of all firms to the
need to attest to us what their control processes were and the sheer
publicity of this probably means that it has reduced its incidence,” he
said.
“My suspicion is the vast majority of this lies in the derivatives
and swaps traders area in the 05/07 period; in the low balling for
reputational reasons in the 07/08,” Turner added.
Libor rigging in the past, however, seemed to be flagrant, with no
attempt to hide it at Barclays.
“I think that one of the shocking things about this is that on some
occasions the derivative trader is not asking the submitter to change
his submission on the basis of a hidden phone call but by shouting it
across the trading floor. That suggests that there was something deeply
wrong with the culture that could possibly have allowed that to occur,”
Turner said.
-London newsroom: 00 44 20 7862 7491; e-mail: drobinson@marketnews.com
[TOPICS: M$B$$$,M$$BE$]
