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Barclays traders face charges in Libor scandal

Barclays traders involved in fixing Libor rates will face criminal investigations, the bank's former chief executive says. Out of about 2,000 traders, 14 were responsible.

In this image taken from video and made available by the Parliamentary Recording Unit former Barclays chief executive Bob Diamond gives evidence to the Treasury Select Committee at Portcullis House, London Wednesday July 4, 2012. Diamond resigned as chief executive officer a day earlier in response to a scandal of false interest rate reporting which also prompted the resignation of the firmís chairman and chief operating officer, and has cost Barclays $453 million in U.S. and British fines. (AP Photo/Parliamentary Recording Unit) EDITORIAL USE ONLY *** Local Caption *** Britain Barclays.JPEG-06e88.jpg
In this image taken from video and made available by the Parliamentary Recording Unit former Barclays chief executive Bob Diamond gives evidence to the Treasury Select Committee at Portcullis House, London Wednesday July 4, 2012. Diamond resigned as chief executive officer a day earlier in response to a scandal of false interest rate reporting which also prompted the resignation of the firmís chairman and chief operating officer, and has cost Barclays $453 million in U.S. and British fines. (AP Photo/Parliamentary Recording Unit) EDITORIAL USE ONLY *** Local Caption *** Britain Barclays.JPEG-06e88.jpg

Barclays traders involved in fixing Libor rates will face criminal investigations, the bank's former chief executive said yesterday.

"I understand there will be follow-up criminal investigations of certain individuals," Bob Diamond said before a parliamentary committee hearing last night.

"It's not up to us, but we're certainly not going to stand in the way of it."

Out of about 2,000 traders, 14 were responsible for fixing the London interbank offered rate (Libor), said Mr Diamond.

But it emerged that senior British government officials raised the issue of Libor-fixing with Barclays just two days before the bank raised billions from Middle Eastern investors including Abu Dhabi and Qatar amid the 2008 financial crisis.

Mr Diamond, who resigned as the bank's chief executive two days ago, said during the hearing that the market perception that Barclays could not raise funds privately could have scuttled the deal or led to the bank's nationalisation.

A higher Libor reflects banks' wariness of lending to each other. Mr Diamond said before the hearing that because his bank was submitting higher Libor rates than the market average, senior officials in Whitehall had raised questions about the bank's ability to survive at the time it was raising funds in the Middle East.

"We had an equity issue about to settle in two days raising £6.7 billion [Dh38.49bn] of capital, when a number of British banks had taken capital from the government," Mr Diamond said.

"There were a number of banks posting [Libor] levels significantly below ours that didn't seem to be right."

Britain's second-biggest bank raised the capital in a deal completed on October 31, 2008, just weeks after the collapse of Lehman Brothers and a wave of capital injections into British banks by the UK government.

The deal allowed Barclays to avoid the nationalisation that befell Royal Bank of Scotland and Lloyds Banking Group, which remain on the UK government's books.

Mr Diamond discussed the bank's Libor submissions with the Bank of England two days before the deal was closed but said that he had not been explicitly instructed to lower Barclays' rates.

This conversation had been misunderstood as it was passed down the chain of command as an order to lower Libor rates, officials said last week.

Last week, Barclays was fined US$453 million (Dh1.66 billion) after settling an investigation with UK and United States regulators over the fixing of Libor and Euribor, its European equivalent.

Libor is used to set prices on $360 trillion of contracts around the globe, from mortgages and small business loans to billion-dollar derivative deals.

Regulators launched the investigation after learning that the bank had altered its Libor and Euribor submissions on behalf of derivatives traders at other banks between 2005 and 2009.

Mr Diamond's departure ends a 16-year career at Barclays, during which he built Barclays Capital, the bank's investment banking unit, from a scrappy fixed income house into a bulge-bracket concern that accounted for a third of the bank's profits last year.

Jerry del Missier, the chief operating officer at Barclays, resigned later on Tuesday, the third high-profile departure from the bank following the resignation of Marcus Agius as chairman on Sunday. Mr Agius was reappointed to lead the search for a new chief executive.

ghunter@thenational.ae

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