Bob Diamond stepped down Tuesday after details emerged that the bank was submitting faulty LIBOR reports on his watch. He appeared before the House of Commons Treasury Committee a little after 9 a.m. ET. His appearance was planned even before he stepped down from his post this week. What was expected to be a brief and uneventful questioning was setting up to be much more.
On Tuesday, an internal Barclays memo from 2008 emerged that suggested the bank's management and regulators at the Bank of England were looking the other way while Barclays submitted artificially low estimates of their borrowing costs at the height of the banking crisis to avoid giving the impression that Britain’s banks were in difficulty.
The LIBOR, or London Interbank Offered Rate, is calculated several times a day and gauges the average of what British banks are paying to borrow short-term funds from each other. It is comparable to Canada's obscure CDOR or Canadian Dealer Offered Rate, only exponentially larger because it underpins global transactions worth roughly $360 trillion annually.
Barclays has already paid almost half a billion dollars in fines for its part in making the LIBOR look lower than it was from 2005 through 2009. The bank has admitted it submitted falsely low borrowing rates to regulators in that period, but blames some of its traders doing so to protect their own positions, not because of any systemic bank policy.
"It's unclear if they were benefiting Barclays," Diamond told legislators Wednesday. "They were acting in their own interest."
According to one of the Barclays memos released Tuesday, Diamond had a conversation in 2008 with Paul Tucker, the deputy governor of the Bank of England, in which the central bank executive wonders why Barclays' LIBOR submissions were wildly out of step with what other banks were reporting.
The memo claims Tucker told Diamond "that while he was certain we did not need advice, that it did not always need to be the case that we appeared as high as we have recently."
Barclays insists that Diamond did not take this to be an order from Tucker. However, it says a subordinate, Jerry del Missier, mistakenly thought the central bank had ordered Barclays to report lower rates and passed the instruction on.
The Bank of England has denied knowing of any impropriety in setting the LIBOR. "If we had been aware of attempts to manipulate LIBOR we would have treated them very seriously," it said.
Barclays has said it suspected that other British banks were reporting lower than accurate borrowing rates at the height of the credit crisis. Lower rates would tend to indicate that lenders had confidence in those banks. Barclays has said that the times when it submitted higher reports generated rumours that it was in trouble.
As expected, the tone of questioning was harsh.
"What kind of firm were you running?" Labour MP George Mudie asked Diamond at one point, a question to which the former banker had no direct reply, choosing instead to laud the culture at Barclays for taking responsibility for its role in the widening scandal.
"There's absolutely no excuse for the behaviour that was exhibited in those emails," Diamond said at one point. "But we put all the resources we could to making sure that the people there were dealt with."
"This doesn't represent the Barclays I know and love," Diamond said.
Documents show at least 14 Barclays traders had submitted false LIBOR rates, but Conservative MP Andrea Leadsom rejected the notion that the actions were restricted to a small group of rogue traders. "Clearly there was a significant amount of collusion going on," she said, a suggestion Diamond repeatedly rejected. "It has been dealt with, it has been eradicated," he said.
"Do you live in a parallel universe to the rest of the UK?" Leadsom quipped.
"You take the conclusions way too far but I am not going to excuse the behaviour," Diamond said at one point.