Jerry del Missier told lawmakers yesterday his former boss instructed him to submit artificially low Libor rates, and blamed compliance managers for failing to act. Less than an hour later, Financial Services Authority Chairman Adair Turner told the committee Barclays had been “gaming the system.”
Del Missier, 50, said he took Diamond’s direction to have come from the Bank of England. He said he then “passed the instruction along” to Mark Dearlove, head of the bank’s money- markets desk, to lower its contributions for the London interbank offered rate.
“It did not seem an inappropriate action given it was coming from the Bank of England,” del Missier told Parliament’s Treasury Select Committee in London. “The government were calling the shots.”
His comments contradicted Diamond, who told lawmakers he wasn’t directed by the Bank of England to lower the firm’s submissions and gave no such instruction. Del Missier also embroiled more executives in the inquiry, saying compliance chief Stephen Morse was told by the bank’s money-markets desk about the request to lower Libor rates, and failed to act.
The desk “informed compliance of the request,” del Missier said. “There was no closing of the loop.”
Barclays fell 4.5 percent to 157.70 pence, the lowest in almost eight months, in London trading yesterday. The stock has declined 10 percent this year, making it the worst performer in the six-member FTSE 350 Banks index. Simon Eaton, a Barclays spokesman, and Daniel Yea, Diamond’s spokesman, declined to comment on del Missier’s remarks.
Del Missier resigned from Britain’s second-largest bank by assets on July 3, the same day as Diamond after the lender was fined 290 million pounds ($453 million) by regulators for attempting to manipulate Libor, a benchmark for $500 trillion of financial products.
Libor is calculated by a survey of banks’ daily estimates of how much it would cost them to borrow from one another for different time frames and in different currencies. Because submissions aren’t based on real trades, the potential exists for the benchmark to be manipulated.
Tracey McDermott, the FSA’s acting enforcement chief, told lawmakers yesterday the regulator is investigating seven banks over Libor-rigging. The U.K. Serious Fraud Office said on July 6 that it had opened a criminal probe.
Diamond told the committee on July 4 that he had received a call from Paul Tucker, then markets director at the Bank of England, in October 2008 questioning why the lender’s Libor submissions were so high. Diamond said he didn’t interpret the call as an instruction to submit lower rates.
Tucker said no government minister or official pressured him to instruct London-based Barclays or any other U.K. bank to lowball its Libor submissions during the financial crisis in his own testimony on July 9. Diamond said del Missier misinterpreted his account of the call as in instruction.
“I was unaware that Jerry had the impression that the conversation I had with Paul, either by note or by conversation, was an instruction,” Diamond told lawmakers. “I was not aware that he did instruct” his traders to lower their submissions.
Del Missier said yesterday he passed on what he took to be an instruction to his head of money markets without getting legal advice. He didn’t seek further clarification from Diamond.
“It was an instruction, wasn’t it?” said David Ruffley, a committee member from the U.K.’s ruling Conservative Party.
“Yes, it was,” said del Missier.
Del Missier was then asked what he said to Dearlove after he had a conversation with Diamond.
“I said I have spoken to Mr. Diamond,” del Missier said. “He’s had a call from Mr. Tucker, alluding to the political pressure around Barclays’s health as demonstrated by our Libor rates and that we should get our rates down and not be an outlier.”
“So you explicitly instructed him to bring the Libor-rate submissions down?” said Andrea Leadsom, a committee member.
“I passed the instruction along, yes,” said del Missier.
Diamond’s comment to the committee that regulators had been “specifically pleased” with the “tone at the top” at the bank was again challenged yesterday by the FSA’s Turner.
The bank “had a cultural tendency to be always pushing the limit” of what was allowed under banking rules, Turner told the committee. He and Andrew Bailey, the regulator’s head of banking supervision, said the cultural issues at Barclays came from the “tone at the top,” including Diamond. Turner said he talked to Barclays Chairman Marcus Agius to drive home the message that the bank was “gaming the system.”
“There have been a set of issues” the FSA had argued about with Barclays “on a case-by-case basis,” Turner said. “It is the accumulation that makes us believe that we have to draw the attention from the chairman to the chairman level,” he said, referring to a February letter to Agius in which he outlined his concerns about how the bank approached regulators.
“There was a problem with this institution,” Bailey said.
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