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Watchdog warned Barclays over Diamond appointment

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19/09/2012
UK financial watchdog the Financial Services Authority said it warned Barclays in 2010 that Bob Diamond might be unsuitable to become the bank's chief executive.

Diamond resigned in July after the bank was fined £290bn by international regulators for trying to rig benchmark interest rates known as LIBOR.

In letters published by the Commons’ Treasury Committee, the FSA said it had warned Barclays that the LIBOR investigation, which was ongoing at the time of Diamond’s appointment, could affect his position.

At a meeting on 15 September 2010 the head of the regulator, Hector Sants, warned Barclays’ then chairman, Marcus Agius, there could be problems ahead.

However, by this time Diamond had been named chief executive of the bank.

In a letter sent in August to Andrew Tyrie, the committee’s chairman, Sants wrote: “The FSA was fully aware that the ongoing investigation might come to conclusions which would be relevant to Mr Diamond’s suitability.

“However, at the time, since the investigation was not concluded, it would not have been appropriate to prejudge its outcome.”

Sants stressed that he “specifically made clear that we reserved the right to re-assess his [Diamond’s] suitability in the light of the conclusions reached by this investigation and requested he make this clear to Mr Diamond” in the meeting.

“I made clear that our concerns about Barclays’ culture were not some generic observation but specific to Barclays, and asked that these concerns be communicated by Mr Agius to Mr Diamond. Mr Agius confirmed that he would do this,” Sants wrote.

The letter is at odds with comments made by Agius, who said the FSA had not cast doubt on Diamond’s appointment during the meeting.

In his reply to Sants, Tyrie noted that the former Barclays Chairman had told the Committee: “These matters [the actions of traders in manipulating LIBOR submissions and the actions of Barclays in making lower LIBOR submissions during the crisis] were not raised by the FSA at the time [September 2010] on casting doubt on his suitability as CEO”.

Tyrie added that Agius had also given the Committee the impression that any concerns raised by the FSA about the bank’s culture were generic rather than specific, again at variance with Sants’s evidence.

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