LONDON, Aug 18: Company culture at Barclays was ‘deeply flawed’ and the Bank of England’s hand in removing its chief executive Bob Diamond was hard to justify, a UK parliamentary report into the ‘disgraceful’ rigging of Libor interest rates said on Saturday.
Few emerge unscathed from the Treasury Select Committee’s 300-page report and annexes, based on a string of high-profile hearings after Barclays was fined a record $453 million on June 27 for manipulating the London Interbank Offered Rate or Libor.
‘Such behaviour would only be possible if the management of the bank turned a blind eye to the culture of the trading floor,’ the report said.
‘The standards and culture of Barclays, and banking more widely, are in a poor state,’ it said, adding it was unlikely the bank acted alone.
Barclays is the first of several banks expected to be fined for rigging a rate which forms a reference point for home loans, credit cards and other financial transactions worth over $350 trillion globally.
The report slammed the UK’s Financial Services Authority (FSA) watchdog for being behind the curve, giving ammunition to London’s critics by starting its own formal probe into Libor setting two years after U.S. Authorities had kicked off theirs.
It said the delay contributed to the perceived weakness of London in regulating financial markets and recommended many reforms, several of which are already being looked at elsewhere, such as criminal penalties and direct oversight.
The FSA responded that its managing director Martin Wheatley will consider the report’s findings in his government-commissioned review of Libor due to be published in September.
The government also welcomed the report and would consider any necessary legislative changes called for by Wheatley.
Barclays said it does not expect to agree with all the report but ‘we recognise that change is required, not least to restore stakeholder trust’.
FAIT ACCOMPLI
The FSA and U.S. Authorities are still probing HSBC , Royal Bank of Scotland, Lloyds and several non-UK banks in connection with possible manipulation.
Diamond, Barclays’ Chairman Marcus Agius and Chief Operating Officer Jerry del Missier all quit in July.
Bank of England Governor Mervyn King and FSA Chairman Adair Turner told lawmakers they did not demand that Diamond step down, but the report concluded that their intervention meant it was a ‘fait accompli’.
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