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Banking regulator: Diamond contributed to a "culture of gaming"

by LLB Reporter
17th Jul 12 9:51 am

“The tone at the top” from former Barclays boss Bob Diamond contributed to a “culture of gaming” at the bank, a banking regulator has told MPs.

Diamond’s account of Barclays’ relationship with regulators was a “highly selective” one, according to Andrew Bailey, the head of the Prudential Business Unit at the Financial Services Authority (FSA).

Bailey told MPs on the Treasury Select Committee, who are hearing evidence on the rate-rigging scandal, that there “was a problem with the institution and that came from the tone at the top”.

The regulator’s evidence came after Jerry del Missier, the former Barclays chief operating officer, told the committee he had asked the bank’s money market desk to drop Libor submissions in October 2008 after he believed the Bank of England had given him instructions to do so.

Del Missier said the request to lower Libor submissions was disclosed to Barclays’ compliance department, which takes responsibility for ensuring policies and procedures are followed.

MPs also heard from FSA executive chairman Lord Adair Turner, who claimed Diamond knew the regulator had sent a letter detailing problems with Barclays’ culture, contradicting the evidence of the former Barclays boss.

Diamond had told the committee he did not know the FSA had been in touch with the bank in April to warn against its “aggressive” stance on regulation.

But the letter from Lord Turner to Barclays chairman Marcus Agius has since been made public. Agius will stand down once a replacement for Diamond is appointed.

Diamond knew of the letter and wanted to discuss it after a meeting, according to Lord Turner. He claimed Diamond had said: “I’m extremely concerned to receive this letter and we take very seriously what you said.”

Lord Turner said investigations were continuing into other banks.

Libor setting is not a formally regulated process but it “could have been supervised”, he said.

An investigation has now been launched into how the FSA missed a number of warnings from Barclays staff that the Libor was being manipulated, Lord Turner said.

The FSA has faced criticism for missing warnings from workers at Barclays and for not acting quicker to tackle allegations of rate rigging at the bank.

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