This is the memo from Bob Diamond, released yesterday, on which many of this afternoon’s questions at the Treasury Select Committee will hinge. It records a conversation with Bank of England Deputy Governor Paul Tucker, and is worth reproducing in full here:
Further to our last call, Mr Tucker reiterated that he had received calls from a number of senior figures within Whitehall to question why Barclays was always towards the top end of the Libor pricing. His response was ‘you have to pay what you pay’. I asked if he could relay the reality, that not all banks were providing quotes at the levels that represented real transactions, his response was ‘oh that would be worse.’ I explained again our market rate driven policy and that it had recently meant that we appeared in the top quartile and on occasion the top decile of the pricing. Equally I noted that we continued to see others in the market posting rates at levels that were not representative of where they would actually undertake business. This latter point has on occasion pushed us higher than would otherwise appear to be the case. In fact, we are not having to pay up for money at all. Mr Tucker states the levels of calls he was receiving from Whitehall were ‘senior’ and that while he was certain we did not need advice, that it did not always need to be the case that we appeared as high as we have recently.
Treasury Select Committee members will want to know whether this was the green light for Barclays staff to start fixing Libor. Tucker’s final line is quite an ambiguous one on which to base a practice that was illegal, and it would be curious if Diamond and Jerry del Missier, the chief operating officer of the bank, had not sought clarification from Tucker before del Missier then passed instructions on Libor on to staff. Evidence also published by the bank yesterday says ‘Jerry del Missier concluded that an instruction had been passed down from the Bank of England not to keep Libors so high and he therefore passed down a direction to that effect to the submitters’.
If Diamond says he took the suggestion that ‘it did not always need to be the case that we appeared as high as we have recently’ as a hint that it was acceptable to report lower Libor rates, then Tucker will also face some tough questioning when he appears before the committee. His recollection of this conversation may well be different. Lord Myners was just on the Today programme pointing out that Tucker will either have a recording of the conversation, or that his secretary would have been listening in.
Any information Diamond can give on how much Whitehall figures, or indeed ministers at the time, knew about Libor practices could also prove explosive. It’s worth noting Myners’ words to Radio 4, as while he defended his colleagues in the Treasury under Alistair Darling’s leadership, he seemed notably less keen to exonerate the whole of Whitehall. He said:
‘And I can also say with a high degree of confidence that I don’t think any of my colleagues in the Treasury, under the leadership of Alistair Darling, would have done so either.’
Something else that also matters, and that committee members will want to push Diamond on, is whether he will hold on to the money he is entitled to. He is owed £1.4m of a year’s salary in lieu. But will he also fight to keep the £17m of bonus payments that he is due to receive? As Fraser argued yesterday, all banks operate in a highly politicised environment now, and the very size of the payout will have automatically set the public against Diamond.
Running as a current under all the exchanges we’ll see this afternoon will be the frustration the committee feels at Diamond’s repeated refusal to acknowledge that while Barclays did not take a penny from the taxpayer in bailout money, the bank survived because of the British government’s support in the form of guarantees. Remember it was before this committee that he made the famous claim that the ‘period of remorse and apology for banks’ was over. Even if, as Robert Peston suggested in his commentary this morning, that people might feel more sympathy if a bank is trying to save itself by altering the rates, the problem is that these actions were part of the Bollinger culture rather than wise bankers’ attempts to save the world. If this story had come out at a different time and from another source, the scandal might have been less explosive. But Libor is now yet another symptom of what the public and politicians now see as the excess and greed of the banks.
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