Bob Diamond feared Barclays nationalisation in 2008, questions rivals’ Libor rates

Barclays former CEO has said he was worried the UK government may feel it had to nationalise Barclays in October 2008 – as it did to other UK banks at the time – and he has questioned the veracity of Libor rates some of his rivals posted.

Bob Diamond questioned whether Libor rates posted by rival banks at the height of the crisis were accurate reflections of the rates they paid on their inter-bank loans.

“It was clear a number of banks posting [three-month dollar Libor] had emergency loans, or were nationalised, or were having trouble funding. We were posting the highest levels and we would question whether other posters were able to fund at the levels they were posting. Some of those banks could not fund at any level.”

Diamond also defended Barclays against accusations it did not act sufficiently to investigate wrong doings by its traders, adding he felt “physically ill” when he read his traders’ emails describing their lowering of Libor rates.

“People who do things they’re not supposed to do, should be dealt with harshly, and go through a process. We have gone through a process ourselves, and dealt harshly with people.

“Immediately it became clear there were specific actions, it was dealt with at the time – we did not wait for the end of the investigation. That behaviour was reprehensible and wrong and I am sorry, disappointed, and I am also angry. There is absolutely no excuse for the behaviour exhibited in those activites as described in the emails. I stand for a lot of people at Barclays. The traders were acting on behalf of themselves I do not think they had any interest in benefiting Barclays.

“It does not represent the Barclays I know and love. We have to be very careful knowing how bad this was, that Barclays also got on top of it. There was no limit to the funds (to investigate it).”

“It puts a real stain on an organisation,” he added, but said only 14 of “a couple thousand traders” at Barclays were involved. He said criminal investigations would occur in a couple of cases.

Barclays quotes for its Libor rates were among the highest three posted by 16 UK banks every day in October 2008, he said, and Bank of England employee Paul Tucker had implicitly tried to tell him at the time, “There are ministers in Whitehall hearing Barclays was always high [in Libor submissions relative to rivals], and that could lead to the impression you cannot fund yourself.”

Diamond said it was important officials understood “We are funding fine – we had an equity issue about to settle in two days, and this was a very pressurised situation. This is probably a momentous week in the history of Barclays and of financial markets.”

Barclays was closing a £6.7bn fund raising from emerging markets financiers, and Diamond said this could have collapsed if rumour spread Barclays was struggling to finance its operations.

Throughout October 2008 – the height of the financial crisis – Diamond said his bank was on every day among the three banks ranked by levels of Libor quotes they posted to the British Bankers’ Association.

 

What questions would you put to Bob Diamond and other senior management and directors of Barclays about the Libor market manipulation?

Send your questions in confidence to: caroline.allen@incisivemedia.com

InvestmentEurope will publish a list of top questions (anonymously).

 

 

 

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