x Abu Dhabi, UAEFriday 28 July 2017

Barclays scandal just the start for bankers

Only time will tell whether the Barclays scandal reveals a larcenous conspiracy. But the problem for banks is that the allegations and revelations provide ammunition to those who believe capitalism is itself a larcenous conspiracy, writes Frank Kane.

Only time will tell whether the scandal over Barclays' manipulation of the key London interbank offered rate reveals a larcenous conspiracy at the heart of capitalism.

But the problem for the banks is that the drip of allegations and revelations is providing powerful ammunition to those who believe capitalism - at least as practised by western banks - is itself a heartless, larcenous conspiracy.

This was plain from the way Bob Diamond was grilled by British politicians yesterday. Members of a United Kingdom treasury select committee are not by nature rabid anti-capitalists, yet they treated Mr Diamond with disdain.

Since the financial crisis of 2008, the huge bailouts many received from governments, the continued abuses that have seeped out ever since and the ongoing flow of bonuses, all bankers are targets.

In the face of this hostility, Mr Diamond appeared pretty much on top of his brief. He resisted the temptation to dish more dirt on regulators and took politicians carefully through the circumstances at the time.

He made the valid point that in late 2008, global interest rates were so volatile that it would have been difficult to say with accuracy where rates should have been.

It was also notable how prominently the Middle East figured in Barclays' strategy at the time. Mr Diamond said his concern about Libor was heightened by the fact that Barclays was going through a recapitalisation that involved investors in Qatar and Abu Dhabi.

Also prominent in the events of the time was Shriti Vadera, the British peer who advised the UK government on banking recapitalisation and who subsequently went on to advise Dubai on the US$25 billion (Dh91.82bn) restructuring of Dubai World.

There is much more to come in this scandal, and none of it will be good for Barclays or the banking industry.

fkane@thenational.ae

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