guardian.co.uk,
Jill Treanor, City editor, Wednesday 27 June 2012
 |
| Bob Diamond has pledged to make Barclays a better corporate citizen. Photograph: Nick Potts/PA |
Barclays
has been slapped with total fines of £290m for its "serious,
widespread" role in manipulating the price of crucial interest rates in a
move that has forced chief executive Bob Diamond and other top executives to
forgo any bonuses for 2012.
The £59.5m
fine from the Financial Services Authority is the largest penalty ever levied
by the City regulator, which found that Barclays contravened its rules for a number
of years and involved "a significant number of employees".
The other
penalties paid by Barclays are to settle with the US authorities, the
department of justice ($200m) and the Commodities Futures and Trading
Commission ($160m), as part of an industry wide probe into the way that
interest rates traded between banks were set.
The
investigation covered the London Interbank Offered Rate (Libor) and the Euro
Interbank Offered Rate (Euribor) both of which play a critical role in setting
the rates of interest that households and major companies pay to borrow.
Libor is
used as a benchmark for setting financial contracts and interest rates around
the world and is overseen by the British Bankers' Association. The BBA is
conducting its own review which will be published later on Wednesday. Banks are
asked which rate they think they will be able to borrow from each other for
periods of time ranging from overnight to 12 months in currencies including
sterling, dollars, euros, yen and Swiss francs.
The FSA
found that Barclays had been making submissions to the process that were
intended to allow the bank to make profits through its traders speculating on
interest rates and reduced the price it submitted during the financial crisis
because of management concerns over negative media comment. The FSA said that
Barclays' top management was concerned that the higher prices it was saying it
expected to borrow at were making it appear that it had liquidity during the
crisis – and so the bank ended up submitting lower prices than it would
otherwise have done.
The FSA made a damning criticism of Barclays and warned other banks that more cases
were to come. Tracey McDermott, acting director of enforcement and financial
crime, said the misconduct was "serious, widespread and extended over a
number of years".
"Making
submissions to try to benefit trading positions is wholly unacceptable. This
was possible because Barclays failed to ensure it had proper controls in place.
Barclays' behaviour threatened the integrity of the rates with the risk of
serious harm to other market participants," said McDermott.
"The
FSA continues to pursue a number of other significant cross-border
investigations in this area and the action we have taken against Barclays
should leave firms in no doubt about the serious consequences of this type of
failure."
Diamond,
who has been pledging to make Barclays a better corporate citizen, is giving up
his bonus for 2012 as a result.
"The
events which gave rise to today's resolutions relate to past actions which fell
well short of the standards to which Barclays aspires in the conduct of its
business. When we identified those issues, we took prompt action to fix them
and co-operated extensively and proactively with the authorities," Diamond
said.
"Nothing
is more important to me than having a strong culture at Barclays; I am sorry
that some people acted in a manner not consistent with our culture and
values."
The boss of
Barclays Capital (the investment banking arm) Rich Ricci; the chief operating
offer Jerry del Missier and finance director Chris Lucas are giving up their
bonuses too.
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