Counterparties: The next bank CEO on the hot seat
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Bob Diamond, the CEO of Barclay’s, is under increasing pressure (a $450 million settlement over charges of manipulating a key interest rate will do that). The governor of the Bank of England declined to call Diamond “fit and proper” to run the bank. For American readers, that’s British English for ‘I’m not saying he shouldn’t be fired, but…’
The Financial Times has called on him to resign, saying “if he had an ounce of shame, he would immediately step down”. The FT cites this almost too-poetic quote from Diamond: “Culture is difficult to define but for me the evidence of culture is how people behave when no one is watching”.
The vitriol isn’t new. In 2010, Bloomberg Markets wrote that “in some UK media and political circles, Diamond is the personification of a greedy banker, a symbol of all that has gone wrong in global finance”. Diamond’s public comments since have done little to change this view.
In 2011, he was called the “unacceptable face of banking” by Lord Mandelson, despite forgoing a bonus in 2008 and 2009. Last year, Diamond told Parliament that “there was a period of remorse and apology for banks, that period needs to be over…The biggest issue is ‘How do we put some of the blame game behind us?’…There’s been apologies and remorse, now we need to build some confidence”. (Diamond pulled in a $10 million pay package last year.)
Shareholders haven’t really agreed. Diamond faced angry protests at an April shareholders meeting as “the bank paid million-dollar bonuses to its senior executives while earnings and the share price fell”.
On Wednesday, Diamond agreed to forgo a bonus over the LIBOR scandal, but the limited, legalistic phrasing of Diamond’s new letter to Parliament won’t do him any further favors. He says that “the authorities found no evidence that anyone more senior than the immediate desk supervisors was aware of the requests by traders”, but is silent on the extent of his and the firm’s knowledge, irrespective of what regulators found.
Diamond also dodges the the issue of ultimate responsibility: “I accept that the decision to lower submissions was wrong”. He tries to get points for pointing to the “level and speed of [Barclay’s] co-operation” with authorities. As Joseph Cotterill says, the problem is that cooperating fully with authorities is categorically different than fully informing them.
Unlike Jamie Dimon, Bob Diamond may not be able to fall back on his past performance and could only have his own missteps to point to. — Ben Walsh
On to today’s links: