Prime Minister David Cameron announced a parliamentary inquiry into the U.K. banking industry after Barclays Plc was fined for rigging interest rates and the lender’s chairman, Marcus Agius, resigned.
“This committee will be able to take evidence under oath; it will have full access to papers, officials and ministers,” Cameron told lawmakers in the House of Commons in London today. “It will be able to start immediately, it will be accountable to this house, it will be able to make sure we get to the truth quickly so this can never happen again.”
The probe -- to be conducted by members of both the Commons and the upper, unelected House of Lords -- will be headed by the Tory chairman of the Commons Treasury Committee, Andrew Tyrie, the premier said. Cameron set the inquiry a year-end deadline for reporting, so that its recommendations can be incorporated into the bill on overhauling bank regulation that will be submitted to Parliament in January.
Agius resigned today after Barclays was fined a record 290 million pounds ($455 million) last week for attempting to rig the London and euro interbank offered rates for profit. Chief Executive Officer Robert Diamond said he has the full support of the bank’s non-executive directors and pledged to stay and implement the recommendations of a review into its Libor submissions.
Martin Wheatley, the chief executive officer-designate of the Financial Conduct Authority, will conduct an inquiry into the functioning of Libor, Chancellor of the Exchequer George Osborne told lawmakers after the prime minister’s statement.
The Financial Services Authority is conducting a number of other investigations concerning Libor following the Barclays case, the agency’s acting head of enforcement, Tracey McDermott, said in a speech today. Separately, U.K. fraud prosecutors said they would decide whether to open a criminal probe into attempts to manipulate the rates within a month.
Osborne told lawmakers that people had asked him that if “fraud is a crime in ordinary business, why couldn’t it be so in banking?”
Unlike the inquiry into media ethics under Judge Brian Leveson that was set up by Cameron last year, the banking probe will be time-limited and controlled by lawmakers. The Leveson inquiry has seen a third of the Cabinet questioned under oath and the publication of private text messages between the premier and media executives.
The probe to be led by Tyrie will draw comparisons with an investigation that the Commons Culture Committee began this time last year into how it came to be misled by News Corp. over the extent of phone hacking at the News of the World newspaper. It called 11 witnesses, finishing hearings in November, and didn’t report until the end of April of this year.
Cameron said the public wants to see bankers punished for wrongdoing, and that the government has “learnt the broader lessons of this scandal,” though he did not call directly for Diamond to resign.
“I don’t think it is for prime ministers to hire and fire bank chiefs,” he told lawmakers, saying Diamond has “some serious questions to answer.”
The leader of the opposition Labour Party, Ed Miliband, said the public wouldn’t be satisfied with “politicians investigating bankers” and repeated his call for a wider, judge-led inquiry. Labour was today putting forward an amendment to the Financial Services Bill currently going through the House of Lords, calling for such a probe. The vote may take place tomorrow.
British politicians feted bankers until the credit crunch, offering them honors and appointing them to inquire into areas of public life far from their usual expertise.
That changed after the 2007 run on Northern Rock Plc. Since then all sides have raced to distance themselves from finance.
Cameron’s coalition government set up an investigation into the structure of the industry in 2010 that produced recommendations to set up firewalls between retail and investment banking, which ministers plan to implement.
Former Royal Bank of Scotland Group Plc CEO Fred Goodwin was stripped of his knighthood in January for leading the lender into the world’s biggest bailout.
Lawmakers from Tyrie’s Commons committee will question Diamond and Agius separately later this week over Libor. The probe Cameron announced will have a wider remit than those hearings.
Cameron’s office said the joint committee’s wider inquiry would have the power to force witnesses to appear and give evidence under oath. A government paper published in April said while such powers, along with the power to fine or imprison witnesses for contempt, have existed historically, they’re “untested in recent times.” The Commons hasn’t levied a fine on a non-member since 1666.
Osborne said that ministers in the Labour government that was in power until 2010 would also be called to testify.
Wheatley’s inquiry will “include looking at whether participation in the setting of Libor should become a regulated activity, the feasibility of using of actual trade data to set the benchmark; and the transparency of the processes surrounding the setting and governance of Libor,” the chancellor told lawmakers. “The review will also look at the adequacy of the U.K.’s current civil and criminal sanctioning powers with respect to financial misconduct, and market abuse with regards to Libor.”
Citigroup Inc., Royal Bank of Scotland Group Plc, UBS AG ICAP Plc, Lloyds Banking Group Plc and Deutsche Bank AG are among the 18 firms regulators are investigating in relation to Libor rates.