Diamond feared nationalisation

BOB Diamond yesterday told MPs that he feared Barclays could have been nationalised if the bank did not reduce its Libor interest rate submissions in October 2008.

At that time Barclays was reporting funding costs at the top end of the scale, even though other banks were in much worse condition.

“They might say to themselves, ‘My goodness, they can’t fund. We need to nationalise them.’,” Diamond told the Treasury select committee.

“We were desperate. We had £6.7bn of equity being raised. If rumours got on the market that we couldn’t fund then maybe we wouldn’t have been able to complete the equity raising.”

Meanwhile, in a sign of the strained relations between Barclays and the Financial Services Authority (FSA), committee chairman Andrew Tyrie revealed that the regulator had expressed concerns to the board about Diamond’s appointment as chief executive in 2010. Then in February this year – just four months before the bank was fined £290m for its role in the Libor scandal – the FSA said the bank needed a change of culture, according to Tyrie.

“They felt there were some cultural issues,” Diamond admitted, but insisted these were related to managerial behaviour lower in the organisation.

Barclays’ former chief executive used his appearance to attack the bank’s rigging of the crucial Libor rate but blamed rogue traders, saying he did not feel “personally culpable”.

He was also reluctant to expand on the details of the crucial phone call between himself and Paul Tucker, deputy governor of the Bank of England, made at the height of the financial crisis.

Following this call Diamond’s right-hand man, Jerry del Missier, got the impression that the Bank of England was encouraging a reduction in the Libor rate, even though Diamond confirmed that was not his interpretation of the conversation.

He could not explain how del Missier, who resigned from the bank just hours after Diamond on Tuesday, had come to that conclusion.

But it was the banker’s claim that he only became aware of the full extent of the Libor-fixing scandal last month that produced gasps of astonishment in the committee room.

Labour MP John Mann came closest to breaking Diamond’s resolve, telling him: “You’re either complicit in what’s going on, grossly negligent or grossly incompetent. The buck stops with you.”

However the former Barclays man refused to comment on Mann’s suggestion that he should waive part of his pay-off, saying only that it was a matter for the board to consider.

MPs were left disappointed by the lack of answers produced during the marathon session.

Committee member David Ruffley MP told City A.M.: “For an intelligent man he didn’t seem to be in control of his organisation.”