BoE's King: Barclays was in denial over Libor manipulation

Tue Jul 17, 2012 3:45pm EDT
 
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By Sven Egenter and Guy Faulconbridge

LONDON (Reuters) - Barclays was in such denial about the scandal over its interest rate manipulation that Bank of England chief Mervyn King said he had to tell it that regulators had lost confidence in Bob Diamond as chief executive days before he resigned.

King, governor of the central bank since 2003, dismissed accusations on Tuesday that he was asleep at the helm while Barclays traders tried to skew a benchmark interest rate that underpins transactions worth trillions of dollars worldwide between 2005 and 2009.

He gave an insight into the flurry of meetings and telephone calls that sealed Diamond's fate on the weekend before the July 3 resignation, but dismissed the suggestion from Treasury Select Committee Chairman Andrew Tyrie that his intervention was akin to handing someone a revolver to shoot the Barclays CEO.

"I don't like these firearm analogies, and they are false," King told the parliamentary committee.

After the hearing Tyrie said he was still concerned that there were insufficient checks on the BoE's ability to use "arbitrary pressure" to force out senior bank executives.

King said he had consulted finance minister George Osborne before informing Barclays that regulators had lost confidence in the bank's executive management, shorthand for Diamond.

"The board of Barclays had been in something of a state of denial about the concerns of the regulators," said King, who appeared composed during his testimony and even smiled at times.

Barclays was fined $453 million last month by U.S. and UK authorities for manipulating the London Interbank Offered Rate (Libor), the short-term interest rate that is supposed to show the price at which major banks are willing to lend to each other.   Continued...

 
The Governor of the Bank of England, Mervyn King, leaves Downing Street in central London May 28, 2012. REUTERS/Neil Hall