FSA flagged up Diamond flaws

Tim Wallace
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BOB Diamond and Barclays chairman Marcus Agius were both warned in 2010 that the bank’s new chief executive could be undermined by the Libor-fixing investigation, according to official documents published yesterday.

But the bank and the Financial Services Authority (FSA) still declared Diamond a suitable person to run a major bank, allowing him to take the top job at the start of 2011.

Diamond and Agius both handed in their resignations in July of this year when Barclays’ involvement in the Libor-manipulation scandal became public.

The documents published by the Treasury Select Committee also show the board had concerns over Bob Diamond’s readiness to become chief executive, and that the FSA was worried he was a poor communicator.

The FSA’s notes of a meeting held on 15 September 2010 to confirm Bob Diamond’s approval as chief executive detail the discussion around Libor.

“Agreeing to Bob Diamond’s appointment at this time was on the basis that the current view of the investigation does not have an adverse effect,” it read. However, then-FSA boss Hector Sants “stressed that this is an ongoing investigation and the FSA’s position could change so the board should be aware. Marcus Agius confirmed that he will notify Bob Diamond.”

But the Libor investigation was not the only concern either party had over Diamond’s suitability for the job.

Marcus Agius was concerned Diamond was “very competitive,” but hoped to “see him mature and relax given he has now achieved his goal” of reaching the top job.

The FSA’s correspondence also implies the regulator had concerns over its relationship with Diamond, with Sants explaining that during interviews with the then-Barclays Capital boss their interaction “had not reached the level of openness, transparency and willingness to air issues with the FSA as is the case with John Varley,” – the outgoing chief executive.

“BD therefore needs further development in this area as he steps up to CEO. BD did not disagree,” it added.

As a result of the regulator’s concerns, the document shows Varley agreed to “coach” Diamond in the months before he fully took over.

Barclays declined to comment.