View the article online at http://citywire.co.uk/money/article/a600244
Why Bob Diamond should resign from Barclays
(Update) It’s not the falling share price that should force Diamond out. It’s what this Libor scandal says about him and his bank.
(Update) Surely not even Bob Diamond can survive in his job as chief executive of Barclays (BARC.L) for much longer?
The bank’s share price is tumbling as public outrage grows at its role in manipulating the Libor interbank lending rate during the financial crisis.
The political heat is growing too. Lord Oakeshott, the Lib Dem peer, was swift in demanding yesterday that Diamond should go.
With both the prime minister and the chancellor demanding answers from Diamond, and the chairman of the House of Commons Treasury Select Committee summoning him to explain himself, Diamond is once again in the firing line. He won't be able to use that line about making bankers 'cuddly' after what we learned yesterday.
With the Serious Fraud Office in discussions with the FSA over the scandal and the chancellor referring to the possibility of criminal prosecutions against indviduals over the market abuse, the sense of crisis at Barclays can only increase.
Also hitting the share price - now down 10% - will be fears of further litigation. Yesterday’s record set of fines of £291 million will dent the bank’s half-year profits, but they do mark a settlement with UK and US authorities.
However, there is no such agreement with investors and corporate clients, who have already launched a class-action lawsuit against Barclays in the US over the Libor scandal. The FSA’s summary of the case with its incriminating emails and messages from Barclays traders celebrating the money they were making from fixing Libor will give their lawyers plenty of ammunition to pursue their action.
Stockbroker Cenkos Securities says the total cost of litigation could ‘dwarf’ the size of the fines. Homeowners with mortgages linked to Libor that may have been more expensive than they should have been may also be tempted to join in the bun fight.
Meanwhile, the ongoing eurozone crisis makes matters worse as it weakens all financial shares.
But it’s not the falling share price that should force Diamond out. It’s what this scandal says about him and his bank that is so damning.
Once again we have seen bankers put their profits and self-interest ahead of the public. We are preparing a Q&A to explain what Libor is and how it works. But the short answer is that it is the rate of interest that banks use to lend to one another. It is a vital benchmark used to price transactions in the multi-trillion-pound markets in currencies, bonds and loans.
It is simply a fundamental matter of trust. Can we trust our big banks to be the guardian of the financial system that we need to live our daily lives and for the economy to function properly?
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