MARCUS AGIUS is poised to resign as chairman of Barclays today, in the hope that his departure will take the sting out of mounting criticism from politicians and shareholders over the bank’s role in the price-fixing of interbank lending rates.
Mr Agius has been sharply criticised by investors over several issues during his five-year tenure as chairman – notably in 2008 when they felt he failed to protect their shareholder pre-emption rights by raising emergency financing from the Middle East, then by pushing through last year’s generous pay deal for chief executive Bob Diamond.
It is unclear whether the bank has a firm replacement lined up yet, though Sir Michael Rake, the bank’s senior independent director, may ask board members such as Sir John Sutherland, former Cadbury chairman, or Alison Carnwath, who heads the remuneration committee, to take up the role at least on a temporary basis.
Barclays last week paid a record £260 million (€322 million) to UK and US regulators for submitting fraudulent bids to the process for setting the London Interbank Offered Rate, which is the reference point for $360 trillion (€284 trillion) in contracts worldwide.
The bank admitted its traders sought to manipulate the rates and that it also understated its borrowing costs during the financial crisis because it believed other banks were doing the same.
It is not clear whether Mr Agius’s planned departure will do enough to satisfy the angry politicians and the public who have been calling for heads to roll in the wake of the settlement.
Mr Diamond was already facing a grilling over the scandal by parliament’s Treasury select committee on Wednesday, and new details emerged yesterday about his personal involvement with the setting of the Libor rate.
In 2008, Mr Diamond spoke to Paul Tucker, deputy governor of the Bank of England, about Barclays’s submissions to the Libor process. When word of that conversation was passed down, managers at the bank “mistakenly” believed they had been granted permission to submit artificially low estimates.
Regulators across the globe probed alleged manipulation by US and European banks of the London interbank offered rate and other key benchmark lending rates. The conversation is described without names in the official UK and US settlement documents from last week’s fine.
They say a senior BoE official asked a senior Barclays manager on October 29th, 2008 why Barclays’s Libor submissions were higher than those of other banks.
Three people familiar with the contents confirmed that the call was between Mr Diamond and Mr Tucker, who heads the BoE’s financial stability arm.
After their conversation, lower-level Barclays officials told the employees who submitted the bank’s Libor estimates to lower their bids because they “believed mistakenly that they were operating under an instruction from the Bank of England (as conveyed by senior management) to reduce Barclays’s Libor submissions”, according to the UK Financial Services Authority.
US settlement documents say Mr Tucker did not give such an instruction and that Mr Diamond did not think he had done so.
Barclays admitted understating Libor bids on other occasions from August 2007 to May 2009.
British prime minister David Cameron has ordered an independent review into the workings of interbank lending rates.– (Financial Times)
