Barclays CEO Diamond Resigns in Scandal
Business + Economy

Barclays CEO Diamond Resigns in Scandal

REUTERS/Chris Helgren

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.

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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.

Opposition Labour Party leader Ed Miliband, who has said he wants to see criminal prosecutions of Barclays bankers, welcomed Diamond’s resignation but said a parliamentary inquiry was not enough and demanded an independent probe led by a judge.

"This is about the culture and practices of the entire banking system, which is why we need an independent, open, judge-led, public inquiry," he said.

The government said a judge-led inquiry would take too long to be of use shaping new laws to tighten rules. Cameron, elected in 2010, has repeatedly made the point that Miliband’s Labour was in power at the time of the wrongdoing.


Antony Jenkins, currently chief executive of Barclays retail and business banking, is the most likely internal candidate to replace Diamond, said Oriel Securities analyst Mike Trippitt. However, the firm may choose to look outside for a new leader to turn the page on the scandal.

"Promoting an existing manager might not look like it is doing enough to tackle problems with aspects of the bank’s culture which the LIBOR scandal has exposed," one top 25 Barclays investor said, asking not to be identified.

Other names in the frame include former JPMorgan investment banking co-head Bill Winters and Naguib Kheraj, the ex-Barclays finance director and former CEO of JPMorgan Cazenove.

"I struggle to see many worthy candidates to replace him," said a top 40 investor. "You must remember that in contrast to RBS, Barclays is two-thirds an investment bank … You couldn’t put a dull, boring banker in charge of the beast because you do need someone with a strong investment banking heritage to take the helm."

The FSA’s Turner said the replacement could be internal or external: "We will simply be interested in making sure they get a very high quality person who is technically capable of

running a large bank and achieve the cultural change that is required."

David Archer, a headhunter for Circle Square, said he had been contacted by a number of top Barclays employees exploring their own options since Diamond’s resignation, unsettled by the loss of two leaders in as many days.

Barclays shares, which rose on the news of the departure of Agius on Monday, added another 3.7 percent on Tuesday morning, rising to 174.7 pence, outpacing a 0.8 percent rise in the European banking stocks index. The shares were still down more than 10 percent from Thursday’s open.

Barclays was fined $453 million by U.S. and British authorities, the first bank to settle in an investigation that is looking at more than a dozen others, including Citigroup, UBS and RBS.

Some analysts say Barclays has been unfairly punished for admitting to practices rife across the world’s big banks.

"In the short term, it has not been well served or rewarded for its co-operation with the regulators," said Investec’s Ian Gordon in a note headed ‘Mob rule’. "We expect Barclays’ sharp share price underperformance to reverse as the market takes a more dispassionate look at the facts."