For those of you who are not aware of what this scandal is about, LIBOR is the overnight lending rate between banks and basically sets the interest at which banks pay one another for borrowing. The rates started to go through the roof in 2008 when the financial meltdown started and it now turns out that Barclays (one of the world's largest banks) was complicit in rigging the rate for years. This has now led to the CEO standing down, and then chairman, who then redacted his own resignation as the CEO (Diamond) had originally sworn to stay in power.
Diamond Quit Barclays After 'Elastic Snapped'
Barclays stock has taken a real tjrashing in the last few days and a record 290 million fine from the SEC and UK authorities have left the bank in tatters:
The stock alone is one thing but confidence in Barclays is now dropping like a stone. Bob Diamond was widely believed to be perhaps the greatest financial genius in Europe at the time and he is now struggling to save his reputation, now that he has lost his job and his massive salary.
Barclays boss Bob Diamond and another member of his top team have quit their posts amid the growing rate-rigging scandal.
Chief executive Mr Diamond and Chief Operating Officer Jerry del Missier, who was later directly-linked to the scandal by the bank itself, fell on their swords 24 hours after Marcus Agius announced his intention to resign as chairman.
In an exclusive interview with Sky's Jeff Randall Mr Agius said Mr Diamond's resignation came "after something just snapped last night".
Today, in an extraordinary series of events, Mr Agius was appointed full-time chairman until a date to be fixed to lead the search for Mr Diamond's successor as the fallen chief executive faced a battle to retain almost £20m in bonuses.
In a conference call with journalists, Mr Agius later moved to provide some clarity on the role of Barclays' management in the scandal, claiming Mr del Missier was the most senior Barclays executive to instruct staff to lower Libor lending rates between banks to make Barclays appear strong.
However, he refused to comment on a report that this happened because Barclays was told in October 2008 by the deputy governor of the Bank of England Paul Tucker that Barclays did not have to submit its Libor rates as high as it had done.
We are yet to see the full term knock on effect of what this will lead to, but already Barclays is being tapped to become the next "RBS group" or "Lloyds banking group" where their reputation is reduced to junk, public sentiment has nothing but anger towards them and is another black eye for banks and the financial sector, which is still reeling from some 5 years of battering.
All of the major leaders in the UK political circles (PM, deputy PM, Chancellor, Shadow Chancellor etc) have all called this the "Right and proper" thing to do but now the questions come in as to whether Gulliver at HSBC and Osorio at Lloyds are safe either. Eric Daniels already lost his fight over the same issue and now it is a question of who knew what and when...rather than being the exception to the rule, Fred Goodwin is now the standard in banking crisis that have engulfed the UK and EU.
The main reason for his departure in the end is believed to be due to his bonus wishes, but Diamond refused to give it up the Hester did a couple weeks ago:
Exclusive: Bank Boss Under Bonus Pressure
A number of directors at Barclays believe that Bob Diamond, the Barclays chief executive, will have to hand back millions of pounds in past bonuses if he is to save his job, I have learned.
"It would have to be on a voluntary basis but a meaningful gesture of some kind is needed," a person close to the board tells me.
Leading shareholders are also applying pressure to the Barclays board to ensure that a more material financial sacrifice is made by Diamond ahead of his appearance in front of the Treasury Select Committee on Wednesday.
Last week, Diamond and three of his executive colleagues said they would waive any bonus entitlement for 2012 in light of the bank’s £290m fine for rigging the Libor benchmark interest rate.
One investor called that move "meaningless".
He said that because many shareholders believe that awarding any bonus for this year would have been impossible after Barclays’ tax avoidance settlement with the Government, the interest rate swaps mis-selling scandal and last week’s fines by regulators in the UK and US.
None of the shareholders to whom I’ve spoken think that the resignation of Marcus Agius, the chairman, will in itself be sufficient to restore faith in Diamond. Barclays confirmed this morning my disclosure yesterday that it was poised to commission an independent inquiry into the culture of the bank.
I’m told that Diamond is likely to reflect on the pressure to hand back some of the vast riches he was awarded during the 2005-08 period in which Barclays traders attempted to rig the Libor rate.
To be clear, there is no mechanism to force him to do that because clawback did not become an established element of directors’ contracts until recently.
So apparently shareholders are less than amused by Barclay's antics but a simple increase in shareholder dividend certainly wasn't going to cut it, and even the resignations are not seen as enough to save the bank's reputation, just by themselves by the looks of it.
So let's take a look at Diamond's salary:
in 2006, Diamond bagged over 10 million in bonuses (cash) alone, with his base salary and stock and share options above that, and 6.5 million and a share of 11 million respectively the following 2 years. Now a bad way to earn, i guess.
Looks like Aguis will lead the search for the next CEO, with Anthony Jenkins next in line from the Barclays board, or to keep in the theme of massive losses and fines, they may go with the former head of JPMorgan, Bill Winters.
Barclays CEO Diamond, COO del Missier Resign | Fox Business
Of course this is just the tip of the iceberg by the looks of it with a dozen banks around the world looking at similar if not the same case in conjunction with Barclays, of abuse of inter bank and lending practices. HSBC, Citi, UBS and others are all in the firing line atm.
Of course none of this even addresses the political fallout of all this including the apparent astonishing admission that the Deputy Governor of the Bank Of England managed to give the green light to all this years ago! Now the British leaders are bickering as to how best investigate all this, whether it be a select committee, judicial inquiry, public inquiry etc which is on top of the FSA investigating a civil investigation and the SFO to decide within a month or less whether to bring in criminal charges or not, too.
Barclays CEO Robert Diamond Resigns - WSJ.com
According to the Barclays documents submitted on Tuesday, Mr. Diamond didn't believe he received an instruction from Mr. Tucker. However Mr. del Missier, then president of Barclays's investment bank, concluded that an instruction had been passed down from the Bank of England not to keep Barclays's rate as high.
The Bank of England declined to comment Tuesday. A U.K. government spokesman didn't have an immediate response. The current Conservative-led government took power in 2010; in 2008, the now-opposition Labour Party was in power, led by then-Prime Minister Gordon Brown.
The U.K. government announced Monday a series of inquiries into ethical standards in the banking industry and as the U.K. Serious Fraud Office said it was considering criminal prosecutions against those who attempted to rig the rates.
Mr. Tucker, who is now the BOE's deputy governor of financial stability, hasn't been implicated in any way by the various authorities investigating the Libor-rigging scandal.
It is likely Diamond will keep most, if not all of his compensation, 6 months of salary after a voluntary resignation, and will not lose most of his bonuses due to a time limit on claw backs, and will likely head back to the US, a multi-millionaire facing little to no punishment for any of his role in any of the rate rigging scandal.
Under the terms of his employment agreement, Mr. Diamond is entitled to six months' salary after a voluntary resignation. He earned £1.35 million ($2.12 million) in salary last year. He isn't automatically entitled to a bonus for this year, but he could still receive payouts under long-term plans. The bank says it is still negotiating the terms of Mr. Diamond's departure.
A spokesman said Mr. Diamond's past bonuses were unlikely to be clawed back, because the attempts at rate manipulations happened more than three years ago and the term for clawbacks on those years' bonuses has expired.
For Whitehall, this is seen as a massive win as they have long had multiparty support for populist anti bank rhetoric and all have championed this resignation:
On Tuesday U.K Chancellor George Osborne hailed Mr. Diamond's departurethe move.
"I think it's the right decision for Barclays. I think it's the right decision for the country because we need Barclays bank to focus on lending to our economy and not distracted by this argument about who should be in charge," he said on BBC radio. "I hope it's a first step to a new culture of responsibility in British banking."
Some of the notes do give more detail on the pressure from the Bank of England, too:
Barclays Notes Suggest Government Pressure on Libor - WSJ.com
And then of course, just like that, the heads in Whitehall all turn on the guy they built up from the ground:
Diamond Resignation: Reaction - The Source - WSJ
*U.K. Chancellor of the Exchequer George Osborne:
Mr. Osborne welcomed Mr. Diamond’s decision to resign and said he hoped it marked a first step toward “a new era of responsibility” in British banking.
Speaking to the British Broadcasting Corp., he said that recent revelations about attempts to rig interbank rates had “in a way opened a door on the very bad practices in banking” that had led to the 2008 financial crisis.
“We need to see a change in the culture of banking and today we saw a step towards that,” Mr. Osborne said. “We are determined to play our part in bringing about this change.”
Of course Osbourne, Miliband, Brown and co were all complicit in this as was Merv King, but it won't be any of their heads that roll, of course...just Diamond's.
Diamond did at least admit his role and apologize for it, in all this, which is more than what we have seen from anyone in Parliament:
Barclays Chief Says 'Sorry' - WSJ.com
PLC Chief Executive Robert Diamond apologized for the interest-rate manipulation scandal that has engulfed the U.K. bank but resisted outside pressure to resign.
In a letter to employees, the 60-year-old Mr. Diamond, Barclays CEO since 2011, said he was "sorry" and vowed to impose new internal controls. "I am disappointed because many of these behaviours happened on my watch. It is my responsibility to make sure that it cannot happen again," Mr. Diamond wrote.
Aguis also took his fair share of responsibility, but for UK lawmakers, it is nothing but relief:
Video - Relief for Politicians After Diamond Resignation - WSJ.com
Here is a look at some of the candidates potentially to replace Diamond:
Video - Candidates in the Frame For Barclays CEO Post - WSJ.com
And then tomorrow will come the fallout, when Diamond testifies in front of a Treasury Select committee...this is just the start, and fire will probably engulf the entire bank by tomorrow.