Barclays ex-exec says he believed Bank of England approved false lower LIBOR submissions

LONDON – A former top Barclays executive admitted ordering staff to submit false interest rates during the credit crisis in 2008 because he believed his action had been sanctioned by the Bank of England.

Jerry del Missier told the House of Commons Treasury Select Committee on Monday that he drew that conclusion from a conversation with the Barclays’ chief executive, Bob Diamond, in October 2008.

The Canadian-born and educated banker insisted that he believed he had done nothing wrong, and said he would not have given the order if he believed it had not been sanctioned by the Bank of England.

Del Missier, 50, resigned as Barclays’ chief operating officer on July 3, hours after Diamond resigned. Just a month earlier, del Missier had been promoted from head of Barclays Capital to chief operating officer of the group.

Barclays has been fined $453 million by U.S. and British agencies for submitting false reports of its interbank borrowing rates, data which goes into the calculation of a key market index, the London interbank offered rate (LIBOR).

In his evidence to the committee on July 4, Diamond said that del Missier had misunderstood a memo dated October 30, 2008, written by Diamond following a conversation with Paul Tucker, a senior figure at the Bank of England, regarding Barclays’ LIBOR submissions.

Diamond’s memo said that “that while he (Tucker) 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.”

Del Missier, however, said his understanding of what action to take came from a conversation he had had with Diamond before seeing the memo.

“I only know what I clearly recall from my conversation with Mr. Diamond,” he said.

Tucker, now a deputy governor of the central bank, has denied giving Barclays any encouragement to submit false rates.

Diamond said he didn’t believe Tucker had sanctioned false submissions, and said he had not given that impression to del Missier.

“I passed the instruction as I had received it on to the head of the money markets desk,” del Missier told the committee. “I relayed the contents of the conversation that I had had with Mr. Diamond, and fully expected that the Bank of England’s views would be incorporated in the LIBOR submissions.”

Del Missier, who was born in Sudbury, Ont., and received his MBA from Queen’s University, said he thought the order he gave was “appropriate given everything that was going on,” but said he had not bothered to check whether it had been carried out.

“The entire financial system was hanging in the balance and in the grand scheme of everything that was going on, it didn’t seem a significant event, given the number of significant events that were transpiring at that time.”

Del Missier said that the LIBOR rate at the time was “hugely, hugely subjective.” Other witnesses have said that there was very little interbank borrowing going on, either because banks were well capitalized or had just been bailed out by the government.

“The Bank of England, as the institution that is responsible for the stability of the system and has the expertise and visibility across the entire market, I mean, their views are extremely relevant here,” del Missier said.

The false rates reported at this time were only part of the investigation. Investigators also found that individual traders at Barclays had persuaded colleagues to submit false rates in the hope of manipulating LIBOR to their advantage.

Leaders of the Financial Services Authority later told the committee that they had serious concerns about Barclays. This led to a meeting with the bank’s executives in February 2012 and an unprecedented letter to the chairman to underline those concerns.

Andrew Bailey, the agency’s No. 2 official, took issue with Diamond’s claim that the regulator was specifically pleased with the tone set by himself and Barclays Finance Director Chris Lucas.

“I did make a very clear point in my presentation that while we had a whole series of issues with them, I did not have evidence that Bob Diamond personally was involved,” Bailey said.

FSA chairman Adair Turner had written to Barclays in April 2012 complaining that the bank had “a tendency continually to seek advantage from complex structures or favourable regulatory interpretations.”

“There was sort of a culture of gaming. Gaming us,” Bailey told the committee.

“And the regulator had had enough?” asked committee chairman Andrew Tyrie.

“Yes,” Bailey said.

“And you were reading them the riot act?”

“Yes,” Bailey said.

Turner said he discussed Diamond’s position with bank chairman Marcus Agius on Friday, June 29, two days after the huge fine was announced.

“I said to Marcus Agius that we were not saying that Bob Diamond had been found to be not ‘fit and proper,’ therefore we would not be giving a direction that he could not be CEO,” Turner said.

However, Turner said he told Agius that the Barclays board needed “to think seriously about the scale of change which Barclays had to make” and whether it could do so under Diamond’s leadership.

On the following Monday, Turner said he briefed Mervyn King, the governor of the Bank of England. “We both agreed that was the correct message to be putting forward,” Turner said.

Diamond resigned the following day.