Diamond accused of misleading lawmakers after FSA chief’s letter

Robert Diamond, former CEO of Barclays Robert Diamond, former CEO of Barclays

July 10 (Bloomberg) -- Barclays Plc Chief Executive Officer Robert Diamond was accused of misleading U.K. lawmakers after a letter from the Financial Services Authority emerged, contradicting his claim regulators were “happy” with the bank.

Barclays’s interactions with the FSA were “strained,” Chairman Marcus Agius told a hearing of Parliament’s Treasury Committee today. As part of his evidence, Agius also released an April 10 letter from FSA Chairman Adair Turner in which the regulator expressed his concerns about “a pattern of behaviour” that questioned whether the bank could be trusted.

Diamond, who resigned last week after the lender was fined a record 290 million pounds ($450 million) for attempting to rig interest rates, told the committee July 4 that the FSA was “specifically pleased” with the “tone at the top.” Under repeated questioning, Diamond failed to mention the FSA’s criticisms about a series of transactions aimed to show the bank’s accounts in a more positive light.

“Barclays has a tendency continually to seek advantage from complex structures or favorable regulatory interpretations,” Turner said in the letter, a copy of which Agius said he showed to Diamond. “The net impact has clearly been unfavourable to the degree of external trust in Barclays’s approach to issues such as tax, regulation and accounting.”

Diamond, 60, said the FSA felt there were some “cultural issues” that needed to be resolved at Barclays and didn’t mention the letter even when prompted by Andrew Tyrie, chairman of the committee.

Bonus Forgone

“Diamond lied to the committee,” David Ruffley, a committee member from the U.K.’s ruling Conservative Party, said at today’s hearing. John Mann, a fellow committee member and lawmaker from the opposition Labour Party, said Diamond2 should be recalled to give more evidence.

“The information provided by Marcus Agius exposes the inconsistencies of Bob Diamond’s responses,” Mann said. “Our only option is to recall Diamond to get the full truth.”

Diamond will forgo 20 million pounds of deferred bonuses, and receive 2 million pounds in pay and pensions, Agius said today. The former CEO didn’t immediately respond to an e-mail seeking comment, while officials at the London-based declined to comment on his behalf.

Barclays rose 2.7 percent to 167.65 pence as of 2:12 p.m. in London trading for a market value of about 20.5 billion pounds. The stock has dropped 4.7 percent this year, making it the worst performer in the six-member FTSE 350 Banks Index.

Turner’s letter criticized the bank for a series of “complex structures” aimed at showing the firm’s assets in a positive light. The Protium transaction in 2009, which involved moving the riskiest assets off its balance using a Cayman Islands-based fund run by former executives, was a “convoluted attempt to portray a favorable accounting result,” Turner said.

‘Misleading Impression’

Barclays also gave a “confusing and potentially misleading impression” that it had a core tier 1 capital ratio of above 10 percent under stress tests conducted by the European Banking Authority last year, Turner said. The lender actually held a 9.8 percent ratio, he said.

Diamond, Britain’s best-paid bank CEO, resigned less than a week after Barclays was fined for attempting to rig interest the London interbank offered rate. Barclays, the first of at least 12 banks to settle with the U.K.’s Financial Services Authority, the U.S.’s Commodity Futures Trading Commission and the Department of Justice, has lost three top executives, $5 billion of market value and sparked a government inquiry.

Bloomberg News

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