King aced Barclays top executive
The Bank of England's governor intervened to ensure that Bob Diamond vacated his post, writes Jill Treanor.
Marcus Agius, the outgoing chairperson of Barclays, has revealed that Bank of England governor Sir Mervyn King played the decisive role in forcing former chief executive Bob Diamond to quit last week.
In a gripping testimony to British members of Parliament, Agius revealed that King summoned Barclays senior directors to a meeting and made it clear that Diamond did not have the support of Britain's financial regulators.
Under repeated questioning by MPs, Agius admitted that Barclays had been warned by the Financial Services Authority about the public perception of its use of complex tax and accounting rules in what the outgoing chairperson of the bank conceded was a "strained relationship" with the City of London regulator.
As Agius announced that Diamond had "voluntarily forgone" £20-million of his potential payoff, he also provided details of the behind-the-scenes drama that led to the chief executive's resignation a week ago – barely 24 hours after Agius had quit in an attempt to save Diamond in the wake of the Libor scandal.
Diamond will still get £2-million, which John Mann MP said he should give to the homeless charity Shelter.
Agius revealed how he and Sir Michael Rake, the most senior nonexecutive on the Barclays board, were summoned to see King on July2 – the day Agius's departure was announced. "He said that Bob no longer enjoyed the support of his regulators," said Agius, who then had to summon a telephone board meeting of nonexecutive directors to decide how to proceed.
Agius and Rake went to Diamond's home on Monday to tell of the regulatory concerns. Diamond "was not in a good place", said Agius. He revealed the intervention by King as MPs on the House of Commons treasury select committee immediately put him on the spot about the views of the Financial Services Authority expressed in a letter by its chairperson, Lord Adair Turner, in April. MPs argued Diamond had misled them when he appeared before the committee last week and was asked about the relationship with the authority. Agius told MPs that the chief executive had quit "because it became clear that he lost the support of his regulators".
Letters published by the treasury select committee and read out by its chairperson, Andrew Tyrie, showed that Turner had said: "I wished to bring to your attention our concerns about the cumulative impression created by a pattern of behaviour over the last few years, in which Barclays often seems to be seeking to gain advantage through the use of complex structures, or through regulatory approaches that are at the aggressive end of interpretation of the relevant rules and regulations."
Turner listed a number of concerns, including Protium, the complex offshore vehicle the bank used to dump some of its toxic assets that is now being unwound, which he said had been perceived as a "convoluted attempt to portray a favourable accounting result". The valuations of positions held with monolines, insurers which were used in the run-up to the banking crisis to insure complex financial instruments, were also cited.
Turner also mentioned more recent concerns, including "protracted communication" about other accounting practices and a "misleading impression" created by the bank when submitting its results of stress tests run by the European Banking Authority.
The way in which the bank managed its tax affairs in the United Kingdom and the publicity surrounding its attempt to use two avoidance schemes that were closed down by the treasury this year were also raised by Turner, who said "the net impact has clearly been unfavourable to the degree of external trust in Barclays's approach to issues such as tax, regulation and accounting".
Diamond will receive "up to" 12 months' salary, pension allowance and other benefits and has agreed to forgo his contractual entitlement to tax equalisation in future.
"The wrongful actions of a relative few should not detract from the outstanding work that Barclays employees carry out each day on behalf of clients and customers around the world," Diamond said. "It is my hope that my decision to step down and today's agreement on my remuneration will help to close this chapter and allow Barclays to move forward and prosper." – © Guardian News & Media 2012