May 19, 2013
Barclays scandal: Diamond admits traders' behavior ‘reprehensible’
The chastened former head of Barclays apologized for the "reprehensible" behavior of his traders who fixed interest rates, but told British lawmakers today his bank had been unfairly singled out after coming forward to admit wrongdoing.
Bob Diamond, 60, quit this week after Barclays agreed to pay nearly half a billion dollars in fines for manipulating the interest rates at the heart of the global financial system.
British politicians have seized on the case as a symbol of a culture of greed that has poisoned the entire financial industry. Newspapers have highlighted e-mails disclosed in the case which show traders congratulating each other for fiddling figures with promises of champagne.
Appearing thoughtful and humble before a parliamentary committee, the man who until yesterday was one of the world's highest paid and most powerful financial executives with an aggressive reputation acknowledged "inexcusable" behavior among his group's traders.
"When I read the e-mails from those traders, I got physically ill," Diamond said. "That behavior was reprehensible, it was wrong. I am sorry, I am disappointed and I am also angry."
He said those involved in rigging interest rates would be subject to criminal investigation and should be "dealt with harshly".
The wrongdoing was "not representative of the firm that I love so much", the American banker said. But he also insisted that Barclays was being made a scapegoat because it had cooperated with the authorities to help unearth the misdeeds.
"This week the focus has been on Barclays because they were the first," Diamond said, describing years of cooperation with regulatory agencies to uncover the practice.
"I think it's a sign of the culture of Barclays that we were willing to be first, we were willing to be fast and we were willing to come out with this."
Of his own decision to step down, a day after saying he wouldn't, Diamond said he had realized that he had become a lightning rod for criticism. "The focus of intensity was my leadership. It was better for me to step down."
Barclays has acknowledged that its traders colluded with others to manipulate the London Interbank Offered Rate, or Libor, the rate that big banks say they borrow from each other which underpins trillions of dollars in global contracts.
In addition to the manipulation by traders, which took place from 2005-2009, Barclays also has admitted it deliberately understated its submissions of Libor rates at the height of the 2008 financial crisis to make its balance sheet look stronger.
Lawmakers questioned Diamond over a 2008 memo, in which he appeared to suggest that the Bank of England or the government might be giving the firm the nod to report that it was able to borrow money at lower rates to make it look better.
At the time, Barclays was reporting Libor funding costs that were among the highest of the large banks, even though others were in much worse shape.
Diamond wrote in the memo that the Deputy Governor of the Bank of England, Paul Tucker, told him "it did not always need to be the case that we appeared as high as we have recently".
Barclays has said that another senior executive - Chief Operating Officer Jerry del Missier, who also resigned yesterday - understood the memo as a green light to submit lower rates.
Diamond said he interpreted Tucker's call as a "heads up" that politicians were worried about the rates Barclays was reporting, but not as a green light to fiddle them.
Diamond feared at the time that if the British government believed Barclays' costs were higher than those of other banks, it might have nationalized it, as it did with several competitors, he said.
"They might say to themselves, 'My goodness, they can't fund. We need to nationalize them.'"
The Bank of England said Tucker intended to present his own explanation of the phone call to lawmakers at a later hearing.