Barclays Plc Chief Executive Bob Diamond quit on Tuesday under fire from politicians and regulators, the highest-profile casualty of an interest rate-rigging scandal spanning more than a dozen big banks across the world."The external pressure placed on Barclays has reached a level that risks damaging the franchise – I cannot let that happen," said Diamond, 61. The terms of his severance were not announced.
His resignation was a sudden reversal, hours after he said it was down to him to clear up the mess at Britain’s third-largest bank, fined nearly half a billion dollars for its part in manipulating a global benchmark interest rate.
Prime Minister David Cameron had announced a parliamentary inquiry after calling for Diamond to take responsibility for the scandal, and the Financial Services Authority regulator had also brought pressure to bear on the board.
FSA Chairman Adair Turner said on Tuesday he had had private conversations with Barclays since Friday morning about the need for "cultural change" at the bank.
"We communicated to the board those were the sort of issues they needed to think about, but it was for them to decide whether they could achieve that degree of change … under the current leadership," he said.
Diamond sent a long letter to staff on Monday showing his resolve to continue. But he and the board decided he should quit later that day after Cameron and finance minister George Osborne announced the parliamentary inquiry.
Politicians and newspapers have zeroed in on the scandal – which revealed macho e-mails of bankers congratulating each other with offers of champagne for helping to fiddle figures – as an example of a rampant culture of wrongdoing in an industry that stayed afloat with huge taxpayer bailouts.
Diamond’s resignation was "a first step towards that change of culture, that new age of responsibility we need to see," Osborne told BBC radio.
"The chairman of Barclays phoned me last night to let me know that this was the decision of the board and of Mr Diamond, and I think Mr Diamond made the right decision," Osborne said.
Diamond will appear before the parliamentary inquiry on Wednesday and could reveal details that may be awkward for the Bank of England, if he suggests that regulators turned a blind eye towards manipulation of the interest rate.
Outgoing chairman Marcus Agius will lead the search for a new CEO, despite having announced his own imminent departure a day earlier. Newly-appointed Chief Operating Officer Jerry del Missier, long a Diamond lieutenant, also left.
The reversal was a shock within the 322-year-old bank, which in recent years has boasted an aggressive culture cultivated by Diamond, first as head of investment banking and then as CEO. One Barclays banker, asking not to be identified without permission to speak publicly, said staff were disappointed.
"Everyone here has been bandying around names, but it’s going to be hard to find someone of the same quality as Bob and John (Varley, his predecessor). I guess it would be hard to appoint someone from the investment banking side now."
Barclays has admitted it submitted low-balled estimates of its borrowing costs to calculate interbank rates from late 2007 to May 2009, a time when Diamond ran investment banking. Large banks’ estimates of the interest rates they pay each other are used to calculate the London Interbank Offered Rate, or Libor, basis for trillions of dollars in contracts around the globe.
By manipulating the figures, banks could give flattering impressions of their financial strength. Barclays says it submitted low figures because it thought rivals were doing the same and higher rates would have made it seem to be in trouble.
The Libor figures submitted by banks are compiled by ThomsonReuters, parent company of Reuters, on behalf of the British Bankers’ Association.
The Financial Times reported that Diamond is threatening to reveal potentially embarrassing details about Barclays’ dealings with regulators if he comes under fire at the parliament hearing on Wednesday, when his evidence will have legal immunity.
A conversation between Diamond and Bank of England deputy governor Paul Tucker in 2008 was cited in documents released by U.S. authorities last week, after which some people at the bank may have mistakenly believed they had been granted permission to falsify the Libor submissions.