Defiant Barclays

By Felix Salmon
July 3, 2012

The resignation of Bob Diamond notwithstanding, it seems that Barclays is sticking to its scorched-earth, if-we’re-going-down-we’re-taking-you-with-us strategy. In its submission to the UK parliament in the run-up to Bob Diamond’s testimony tomorrow, Barclays is very aggressive and not at all contrite.

The submission starts with a statement that Barclays should somehow be viewed in a better light than all the other banks:

The bank has invested nearly £100m to ensure that no stone has been left unturned [in the investigation]. The bank’s exceptional level of cooperation was expressly recorded by each of the Authorities, and was described by the DoJ as “extraordinary and extensive, in terms of the quality and types of information provided” and ”the nature and value of Barclays cooperation has exceeded what other entities have provided in the course of this investigation.” That cooperation has led to Barclays being the first to reach resolution of these issues. It ironic that there has been such an intense focus on Barclays alone, caused by our being first to settle in the midst of an industry-wide, global investigation.

It then launches into a long disquisition about the now-notorious phone call between Diamond and the Bank of England’s Paul Tucker:

On 29 October 2008, Bob Diamond received a call from Paul Tucker, the Deputy Governor of the Bank of England. The substance of that call was captured by Bob Diamond via a note prepared at the time…

Subsequent to the call, Bob Diamond relayed the contents of the conversation to Jerry del Missier. Bob Diamond did not believe he received an instruction from Paul Tucker or that he gave an instruction to Jerry del Missier. However 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 submitters.

All we know of the phone call is Diamond’s contemporaneous note of it, preserved in a fuzzy photocopy.

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This is Barclays’s none-too-subtle attempt to finger the Bank of England in the whole sordid affair, implying that its Libor price-fixing was somehow a consequence of this phone call from Tucker. But if you look at the FSA’s Final Notice on the Libor fixing, all of the dubious activity takes place before the phone call — between January 2005 and July 2008.*

Besides, only in the minds of traders who had been fixing Libor for years would Tucker’s conversation have ever been taken as a nod and a wink to do just that. Libor is a measure of the interest rate at which banks lend to each other; Tucker was clearly just saying that Barclays should work with those other banks to get that rate down.

There isn’t a transcript of this conversation anywhere, but I can easily imagine Tucker saying something like this: “lots of senior Whitehall types are seeing the high rates you’re paying in the Libor market, and they’re asking me about it. I’m sure you don’t need my advice here, but you really shouldn’t be so high”. That’s a regulator doing what regulators should do — telling banks to get their act together and normalize their operations. What he meant, I’m sure, is that Barclays should do whatever it took to improve its reputation with other banks, so that they would lend to Barclays at lower rates.

And yet the corrupt Barclays operation, including Jerry del Missier, reckoned that it would be easier to just go back to their old sordid ways, and nobble the Libor fixings instead. Or at least that’s the impression you get from the Barclays document. If you look at official-sector documents, the worst thing that Barclays did in the wake of the phone call was basically compliance-related.

Barclays, in its submission, tries very hard to show that for most of the time that the Libor price-fixing was going on, it still reported higher rates than most other banks. In other words, Barclays is still trying to exonerate itself, and/or point fingers at other banks and even the Bank of England. I’m sorry, but it’s far too late for that. The verdict has come down, the fine has been paid. The job of Barclays, now, is to put the whole episode in the past, say that it’s sorry, and move on — under a new chairman and a new CEO.

But don’t expect much along those lines from Diamond, tomorrow. He’s still sore — and he’s going to make sure that parliament knows it.

*Update: Thanks to James Mackintosh for finding allegations of more dubious activity in paragraph 12, which talks about “numerous occasions between September 2007 and May 2009″. Obviously the beginning of that period still predates the phone call, but the end doesn’t.

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