The news that Barclays Bank PLC. had been fined $452 million by three regulatory agencies for falsely reporting rates and attempting to manipulate Libor (London InterBank Offered Rate), the benchmark interest rate for hundreds of trillions of dollars in borrowing across all fixed income products touching every part of the global economy, is a pretty big deal, especially seeing that regulators state that the misconduct occurred over four years, beginning in 2005.
Perhaps big enough for some CEO to lose his job. But we are forgetting about the new world we forged since the credit meltdown of 2008 where banking officials held a gun to their own head and the rest of us blinked.
There is a disconnect between what is reported and the corporate response by Barclays.
In its filing and settlement of charges against Barclays the CFTC stated that Barclays “attempted to manipulate and made false reports concerning both benchmark interest rates (libor and Euribor) to benefit the Bank’s derivatives trading positions by either increasing its profits or minimizing its losses. This conduct occurred regularly and was pervasive.”
Barclays' statement says: “The events which gave rise to today’s resolutions relate to past actions which fell short of the standards to which Barclays aspires in the conduct of its business. When we identified those issues, we took prompt action to fix them and co-operated extensively and proactively with the authorities.”
Should we talk about the disconnect here? The CFTC, Financial Services Authority and Justice Department did recognize Barclays' cooperation but they didn’t exactly self-report this. These are serious ethical and perhaps criminal acts that occurred over four years and Barclays has the gall to use terms like, “when we identified,” and “prompt action,” and "proactive.” That does not square with: “This conduct occurred regularly and was pervasive.”
Earlier in its statement Barclays highlighted that this was, “Part if an industry-wide investigation into the setting of interbank offered rates…”
See Ma everyone was doing it. Perhaps that will prove to be true but it is an excuse that doesn't hold water for an eight-year-old let along a global bank.
The kicker? Barclays Chief Executive, Bob Diamond, said: “Nothing is more important to me than having a strong culture at Barclays; I am sorry that some people acted in a manner not consistent with our culture and values. To reflect our collective responsibility as leaders, Chris Lucas, Jerry del Missier, Rich Ricci and I have voluntarily agreed with the Board to forgo any consideration for an annual bonus this year.”
Not resigning in shame, not offering to return bonuses from the years of false reporting that may have had a direct impact the Bank’s bottom line. But they will forgo bonuses for this year. When you lead a company that just gets fined $452 million by making a deal to avoid a criminal complaint—are bonuses still an option? How is a resignation not automatic here? How do you square that statement with this from the CFTC: “throughout the global financial crisis in late August 2007 through early 2009, as a result of instructions from Barclays’ senior management, the Bank routinely made artificially low LIBOR submissions to protect Barclays’ reputation from negative market and media perceptions concerning Barclays’ financial condition.”
This is the type of blindness and self-absorption that occurs from years of not holding people accountable.