barclays fined $450m for cheating

Barclays fined $450m for cheating global markets over four years

BY: PATRICK HOSKING From: The Times June 28, 2012 10:08AM

THE chairman and chief executive of Barclays were fighting for their jobs last night after an investigation revealed that Britain's third-biggest bank lied and cheated its trading partners for years.

Barclays, renowned in Britain for aggressive Wall Street-style investment banking, was fined a total of £291 million ($449.7 million) by three regulators on both sides of the Atlantic for repeatedly manipulating key prices at the heart of the financial system.

Bob Diamond, the bank's chief executive, and Marcus Agius, the chairman, fought to contain the damage, with Mr Diamond apologising and promising to give up one of his bonuses.

But shareholders still questioned the future of both men. One big institutional investor in Barclays said: "Bob Diamond is now under considerable pressure to demonstrate that this is not something he encouraged as part of the culture to meet profit targets. While he has a fan club, there are other shareholders who are very concerned about his stewardship of the bank."

Another large shareholder in the bank said: "It looks really horrible. It says something about the culture at Barclays and the governance." He suggested that Mr Agius should go, and possibly Mr Diamond as well, "though Agius is more expendable than Bob".

Regulators said that the bank misled markets for at least four years up to 2009 to make profits for itself and later to damp down market worries about its vulnerable position at the height of the banking crisis. The illegal and improper conduct might also have increased, and sometimes reduced, the interest rates paid by tens of millions of people on their mortgages, as well as endangering financial stability.

The offences took place in Barclays Capital, the bank's investment banking arm, which was run at the time by Mr Diamond.

The fines come weeks after ministers accused Barclays of side-stepping £500million of taxes by exploiting two "highly abusive" tax avoidance schemes, and days after three of its executives were charged with tax fraud in Italy.

Andrew Tyrie, chairman of the Commons Treasury Select Committee, said: "This is tantamount to lying for profit. It's deeply wrong and shocking. I would expect to see disciplinary action."

Lord Oakeshott of Seagrove Bay, the Liberal Democrat peer, said that Mr Diamond must be dismissed and Barclays broken up: "The whole City knew Barclays Capital under Bob Diamond was a casino, but not that they were rigging the wheels and loading the dice".

While there was no suggestion in the regulators' reports that board members knew about the abuses, they pointed to serious failings in controls and governance. At the heart of the scandal was Barclays' repeated attempts to distort for profit key market interest rates known as Libor and Euribor. These rates are used by banks to price mortgages and other products worth trillions of pounds as well as to settle financial bets made by bank traders.

The Financial Services Authority said that the misconduct was "serious, widespread and extended over a number of years". It fined the bank £59.5 million, its biggest penalty for City wrongdoing, adding that it would have been £85 million but for Barclays' co-operation in its investigation.

Tracey McDermott, the FSA's acting director of enforcement and financial crime, said that the authority was carrying out a number of investigations into other organisations. "I cannot say how many other banks we are investigating. We do have a number of ongoing investigations. These investigations need to run their course. Once they are concluded, we will obviously publicise the outcomes."

In the US, the Commodity Futures Trading Commission fined the bank $200 million, ruling that the culture of self-interested market manipulation at Barclays was "pervasive", lasted for years, and resulted from orders from "senior management".

The US Department of Justice ordered Barclays to pay a $160 million penalty after a criminal investigation involving the FBI. It said that it had stopped short of prosecuting the bank because of its "extraordinary co-operation" in a wider investigation which takes in other banks.

Mr Diamond said that the censure and fines related to past actions and the issues thrown up by them had been quickly corrected. "I am sorry that some people acted in a manner not consistent with our culture and values," he said.

Mr Diamond is to waive one of his bonuses this year. This annual bonus could have been worth up to £2.7 million on top of his base pay of £1.35 million. But he has decided not to waive a long-term bonus that could be worth up to £5.4 million this year.

Additional reporting: Susan Thompson