Ex-Barclays executive to be grilled by MPs

Protesters spray champagne as they demonstrate against what they describe as a "close relationship between bankers and politicians" outside Portculis House in London. (AFP)

Protesters spray champagne as they demonstrate against what they describe as a "close relationship between bankers and politicians" outside Portculis House in London. (AFP)

MPs will demand to know on Monday why former Barclays chief operating officer Jerry del Missier, who resigned in the wake of the Libor rate-fixing scandal, issued instructions to reduce the bank's interest rate submissions.

As US authorities consider launching a criminal inquiry into the bank's involvement in manipulating interest rate levels, a series of hearings will take place this week relating to the scandal.

But Barclays has stepped up its defence by telling its staff other banks could be even more culpable. In an internal memo sent on Friday, co-signed by chairperson Marcus Aguis, Barclays apologised for the impact of the scandal on staff, but added: "As other banks settle with authorities, and their details become public, and various governments' inquiries shed more light, our situation will eventually be put in perspective."

About 15 other lenders, including Lloyds Banking Group and Royal Bank of Scotland, are currently being investigated.

As well as questioning Del Missier, a close ally of former Barclays boss Bob Diamond, MPs will also grill the UK's top City watchdogs, who will be asked to explain why they failed to take heed of warnings from US regulators of possible malpractice relating to inter-bank lending rates.

Sir Mervyn King, the governor of the Bank of England, is expected to face tough questioning after his deputy Paul Tucker explained to MPs on the powerful all-party treasury select committee that the central bank was unaware of interest-rate-fixing allegations.

"This was a cesspit," he said of the Libor manipulation. "We were not aware of it, other than what is starting to come out in these investigations.
We didn't have any knowledge, I didn't have any knowledge."

Criminal court
Correspondence published after Tucker's testimony shows the US authorities were concerned at potential abuses of the Libor system and asked the UK regulators to investigate. It has also emerged that Barclays alerted US authorities about possible irregularities in 2007.

The US justice department is understood to be building a criminal case against Barclays and several other financial institutions and their employees related to the manipulation of interest rates.

US government officials close to the case expect to file charges against at least one bank this year, the New York Times has reported. Investigators in Washington and London settled a regulatory investigation last month that laid blame for the manipulation on a small group of traders and their managers. Diamond and Del Missier escaped sanction.

Adair Turner, the chairperson of the Financial Services Authority, the UK's main banking regulator, will be asked by MPs to justify his decision to avoid sanctions against Diamond until five days later, when he and King told the Barclays chairperson that Diamond no longer had their support as boss of Barclays. It has already emerged that the regulator had a strained relationship with the bank even before the Libor scandal emerged.

Barclays has lost several large accounts over the scandal as businesses, local authorities and individuals cut their ties with the bank.

Excessive profits
Over the weekend it emerged that Barclays planned to pull out of the rate-setting panel for interbank lending in the United Arab Emirates.

Libor is used to determine borrowing casts for trillions of dollars in financial products, including mortgages, credit cards and student loans.

Barclays faces investigations for inflating the interest rates it submitted for Libor to cream off excessive profits from lending. It is also under scrutiny for depressing the Libor figures to project an image of a strong bank that could borrow at low rates itself.

Barclays said in its evidence to the treasury select committee: "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 [traders]."

Barclays has said that Del Missier was investigated by the Financial Services Authority for his actions and ultimately deemed to have changed the level of Libor – and that it did not take any enforcement action.

It emerged that in 2010 his basic pay of £734 000 was bolstered to more than £40-million when performance-related deals were included. – © Guardian News and Media 2012

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