Financial News’s Matt Turner files this dispatch about the impact Barclays CEO Bob Diamond’s resignation could have on the ongoing Libor investigation.
If it is the case that Barclays was thrust into the light of day first, ahead of other banks under investigation for Libor fixing, because of its “significant cooperation”, what then of the other banks? to what extent does the departure of the bank’s senior management set a precedent for other banks under investigation for Libor fixing?
Reuters
It is understood that around a dozen banks are under investigation for their part in the Libor scandal, including, presumably, the employer of a trader who thanked a counterpart at Barclays for the bank’s lowered Libor submission with an invitation to enjoy Bollinger champagne together.
Will the emails of traders at rival bank’s contain the same references to rate-rigging, their submitters calling traders “big boy”? And if so, will their chairmen, chief executives and heads of investment banking be forced to fall on their swords?
One UK banks analyst said: “You need to be careful what you wish for. If a whole swathe of competent senior management get wiped out, you have not helped the situation. It is perhaps a bit strong to call it a witch-hunt, and this issue had to be addressed, but if you see a repeat across the banking sector, an industry which has a critical part to play in the recovery has been severely weakened.”
According to the Financial Services Authority’s final notice, Barclays took into account requests made by its interest-rate derivatives traders when submitting Libor requests between January 2005 and July 2008, and made Libor submissions that took into account concerns over the negative media perception of the bank between September 2007 and May 2009.
Of the big UK banks, RBS’ chief executives Stephen Hester took up his current role in the latter stages of that period in November 2008, while António Horta-Osório, chief executive of Lloyds Banking Group, took up his role in March 2011.
RBS declined to comment, while a spokeswoman for Lloyds Banking Group said the bank was assisting various regulators in their ongoing investigations, and that it would be inappropriate to comment further until these investigations are complete.
UK Chancellor George Osborne has previously said that HSBC and Citigroup are under investigation by the FSA for their role in setting the Libor rate.
However, the FSA is now acknowledging that HSBC, where Stuart Gulliver has led the group as chief executive since January 2011 having previously led global banking and markets, is not under investigation. The regulator has also confirmed that Citi is not under investigation.
One UK banks analyst said: “If you look at RBS, Hester wasn’t in charge through the crisis, Horta-Osorio wasn’t in charge through the crisis. Diamond and Gulliver are the two survivors in terms of senior management through the crisis.”
UBS, which was also identified by George Osborne as being under investigation, said in a statement: “We are taking these investigations very seriously and are fully cooperating with the authorities.”
Whether Barclays’ and Diamond are the exception or the rule will become evident over time. The industry will be hoping it is the former and there will be no fundamental reshaping of the senior management teams at the City of London’s largest institutions.
One banks analyst at US bank said: “That is the risk. There are too many unknowns right now to have a strong view, but the market is definitely talking this morning about the extent to which this sets a precedent. How that evolves is unclear.”