Barclays sign
July 2 (Bloomberg) -- Barclays Plc Chairman Marcus Agius resigned after the bank was fined a record 290 million pounds ($455 million) for trying to rig interest rates in a bid to head off pressure for Chief Executive Officer Robert Diamond to quit.
“I am truly sorry,” Agius, who had been chairman of Britain’s second-largest bank by assets since 2007, said in a statement today. “Last week’s events, evidencing as they do unacceptable standards of behavior within the bank, have dealt a devastating blow to Barclays’s reputation.”
John Sunderland, a Barclays director and former chairman of Cadbury Schweppes Plc, will oversee a search for a replacement, the London-based lender said. Michael Rake will become deputy chairman. Agius, 65, will remain in his position until his replacement is appointed.
He is the most senior executive to step down so far following probes by global regulators into whether lenders colluded to manipulate Libor. Lawmakers are pushing for Diamond’s resignation after U.K. and U.S. regulators found the lender “systematically” attempted to rig the London and euro interbank offered rates for profit.
Agius’s departure “will do little to appease the many who see Bob Diamond as having primary responsibility,” Gary Greenwood, a banking analyst at Shore Capital, said by e-mail. “While Agius’s departure will grab the headlines today, the bigger issue remains whether Diamond should also remain.”
Shares Fall
Barclays climbed as much as 5.6 percent and was up 4 percent at 169.4 pence as of 10:54 a.m. in London, valuing the lender at 20.7 billion pounds. The stock has fallen 14 percent since the fine was announced on June 27, making it this year’s worst performer in the six-member FTSE 350 banks index.
Rake, 64, is chairman of BT Group Plc and has been a director of Barclays since 2008. The former accountant will oversee an inquiry into the bank’s business practices, the lender said today. The panel, to be run by an independent outsider and group of non-executive directors, will produce a public report of its findings.
“I am committed to ensuring that the recommendations from this review are implemented in full,” Diamond said in an e- mailed statement today. Agius said the review was part of a broader plan to establish a “zero tolerance” policy for any actions that harm the firm’s reputation.
David Cameron
Both Diamond and Agius have been called to appear this week before British lawmakers on the Treasury Select Committee. The U.K. government is also preparing an inquiry into the future of Libor, including introducing criminal penalties for people who breach rules surrounding the rate, said a Treasury spokesman, who declined to be named citing government policy.
Prime Minister David Cameron on June 28 called for accountability to go “all the way to the top,” while opposition Labour Party leader Ed Miliband has called for a full inquiry into the industry’s practices.
“Politicians will see this as him taking a bullet for Bob Diamond,” said Christopher Wheeler, a London-based banking analyst at Mediobanca SpA. “They realized they needed to do something, and Agius was chairman during the time they got fined for -- but will it be enough?”
Diamond, who built up and ran the securities unit during the period being probed by regulators, may keep his job because he has no obvious successor, according to Chirantan Barua, an analyst at Sanford Bernstein Research in London. None of the bank’s largest shareholders have publicly called for Diamond’s resignation so far.
‘Poster Child’
“Barclays has become the poster child for this because they have been the first to be assessed by the regulators on both sides of the Atlantic,” Euan Stirling, who manages U.K. stocks at Standard Life Investments, told the British Broadcasting Corp.’s Today program today. “This is going to spread far and wide throughout the industry”
Diamond, 60, his three top lieutenants, Chief Operating Officer Jerry del Missier, Finance Director Chris Lucas and corporate and investment banking chief Rich Ricci have already forfeited their bonuses for this year following the fines.
Agius joined Barclays after a 34-year career at Lazard Ltd., where he had been chairman of the firm’s London unit. There, he advised on banking takeovers including Halifax Group Plc’s 2001 merger with Bank of Scotland to create HBOS Plc. As non-executive chairman of BAA Plc, Agius helped the owner of London’s Heathrow airport negotiate a higher takeover price from Grupo Ferrovial SA in 2006.
Quits BBA
He had already faced investor pressure when the lender raised more than 5 billion pounds in 2008 from a group of funds from Abu Dhabi and Qatar without giving existing shareholders the opportunity to buy new stock. Shareholders including Legal & General Group Plc complained at the time their pre-emption rights had been ignored, and in protest about 16 percent of investors opposed Agius’s re-election as chairman in April 2009.
He also had to apologize to shareholders for failing to communicate the firm’s pay plans to investors clearly in April after 27 percent of shareholders voted against Diamond’s 12 million-pound compensation package.
Agius also stepped down today as chairman of the British Bankers’ Association, the industry lobby group that oversees Libor.
Libor is determined by about 18 banks’ daily estimates of how much it would cost them to borrow from one another for different time frames and in different currencies. Because banks’ submissions aren’t based on real trades, the potential exists for the benchmark to be manipulated by traders.
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Bank of England
At least a dozen firms, including Citigroup Inc., Royal Bank of Scotland Group Plc and UBS AG, are being probed by regulators worldwide for colluding to rig the rate, the benchmark for more than $360 trillion of securities, including mortgages, student loans and swaps.
Barclays deliberately reported artificially low borrowing costs at the height of the 2008 financial market turmoil after a senior manager discussed external perceptions about the bank’s strength with regulators at the Bank of England.
Barclays “believed mistakenly that they were operating under an instruction from the Bank of England” to lower its Libor submissions, according to Britain’s Financial Services Authority. At that time, Barclays was concerned about how it was being perceived due to its higher Libor submissions relative to other banks whose reported borrowing costs helped set the rate.
Profit Motive
The Bank of England didn’t instruct Barclays to lower its Libor submissions during the phone call, the FSA said. Instead, a “misunderstanding or miscommunication” occurred within Barclays as the substance of the conversation was relayed down the chain of command, the FSA said. Paul Tucker, who was markets director at the time and is now the central bank’s deputy governor for financial stability, led the call, according to the Bank of England.
Separately, Barclays traders routinely coordinated with counterparts from at least four other banks in an attempt to move interest rate benchmarks, according to documents released on June 27 by the U.S. Commodity Futures Trading Commission, the U.S. Justice Department and the U.K. Financial Services Authority.
Derivatives traders requested the false submissions in the Libor and Euribor setting process, as they were “motivated by profit and sought to benefit Barclays’ trading positions,” the FSA said.
Andrew Tyrie, the chairman of Parliament’s Treasury committee, said Diamond will have to answer questions about who profited from the firm’s false submissions and who at Barclays knew about them, according to an interview with the Daily Mail.
SFO Probe?
“There appear to have been at least two motives for the rigging of Libor,” Tyrie was cited as saying in the interview. “The first was to enable traders to make a profit. The second was to support share prices at a crucial time -- and that is something that might reasonably be considered the responsibility of the relevant companies as a whole.”
The U.K. Serious Fraud Office is considering whether to open a formal investigation, its spokesman said last week. The U.S. Justice Department is conducting its own criminal probe into the attempted manipulation of interbank offered rates.
FSA Chairman Adair Turner said yesterday the Barclays fine shows regulator needs more powers to bring criminal charges.
“Further steps were made a few years ago to give us the ability to bring criminal charges in particular areas of market abuse, but they did not cover the Libor market,” Turner said in an interview on the British Broadcasting Corp.’s “Andrew Marr Show.” “We now have to look further and see whether we should strengthen these powers considerably.”
--With assistance from Lindsay Fortado, Jennifer Ryan, Kevin Crowley and Scott Hamilton in London. Editors: Edward Evans, Jon Menon
