Barclays Chairman Admits Mervyn King Forced Decision for Diamond to Quit

Showing You The Door

Marcus Agius, the outgoing chairman of Barclays, has revealed that Bank of England governor Sir Mervyn King played the decisive role in forcing former chief executive Bob Diamond to quit last week.

In a gripping testimony to MPs, Agius revealed that King summoned Barclays senior directors to a meeting and made it clear that Diamond did not have the support of Britain's financial regulators.

Under repeated questioning by MPs, Agius admitted that Barclays had been warned by the Financial Services Authority about the public perception of its use of complex tax and accounting rules in what the out-going chairman of the bank conceded was a "strained relationship" with the City regulator.

As Agius announced that Diamond had "voluntarily forgone" £20m of his potential payoff, he also provided detail of the behind-the-scenes drama that led to the chief executive's resignation a week ago – barely 24 hours after Agius had quit in an attempt to save Diamond in the wake of Libor scandal. Diamond will still get £2m – which John Mann MP said he should give to the homeless charity Shelter. Prime minister David Cameron's official spokesman said: "I think the decision to forgo the bonus is a sign that they understand public concerns and that they understand that there is a need for a change in the culture of banks."

Agius revealed how he and Sir Michael Rake, the most senior non-executive on the Barclays board, had been summoned to see King last Monday – on the day Agius's departure was announced. "We had a conversation in which he said that Bob Diamond no longer enjoyed the support of his regulators," said Agius, who then had to summon a telephone board meeting of non-executive directors to decide how to proceed.

Agius and Rake went to Diamond's home on Monday to tell of the regulatory concerns. Diamond "was not in a good place" said Agius. Agius revealed the intervention by King as MPs on the Treasury select committee immediately put him on the spot about the views of the FSA expressed in a letter by the regulator's chairman Lord Turner in April.

MPs argued Diamond had misled them when he appeared before the committee last week and was asked about the relationship with the FSA. Agius told MPs that the chief executive had quit "because it became clear that he lost the support of his regulators".

Letters published by the Treasury select committee, and read out by its chairman Andrew Tyrie, showed that Turner had said: "I wished to bring to your attention our concerns about the cumulative impression created by a pattern of behaviour over the last few years in which Barclays often seems to be seeking to gain advantage through the use of complex structures, or through regulatory approaches which are at the aggressive end of interpretation of the relevant rules and regulations."

Turner listed a number of concerns including Protium, the complex offshore vehicle which the bank used to dump some of its toxic assets that is now being unwound which he said had been perceived as a "convoluted attempt to portray a favourable accounting result". The valuations of positions held with monolines, insurers which were used in the runup to the banking crisis to insure complex financial instruments, were also cited.

Turner also went on to talk about more recent concerns including "protracted communication" about other accounting practices and a "misleading impression" created by the bank when submitting its results of stress tests run by the European Banking Authority.

The way that the bank had managed its tax affairs in the UK and the publicity surrounding its attempt to use two avoidance schemes which were closed down by the Treasury this year, were also raised by Turner who said that "the net impact has clearly been unfavourable to the degree of external trust in Barclays approach to issues such as tax, regulation and accounting".

Agius said that the "board deeply regrets the circumstances that led to Bob resigning" his position. Diamond will receive "up to" 12 months' salary, pension allowance and other benefits and he has agreed to forgo his contractual entitlement to tax equalisation going forward, which last year resulted in a payment of £5.7m. Agius said this amounted to £2m.

"Despite having no personal culpability, he recognises more than anyone the negative attention that they have generated and has taken characteristically strong action to address that. These circumstances do not detract in any way from the tremendous legacy that Bob has left at Barclays, and his actions are clear indications of his commitment to the institution to which he has contributed so much," Agius said.

In a statement, Diamond said: "For the past 16 years I've had the honour of working at Barclays. The wrongful actions of a relative few should not detract from the outstanding work that Barclays employees carry out each day on behalf of clients and customers around the world. It is my hope that my decision to step down and today's agreement on my remuneration will help close this chapter and allow Barclays to move forward and prosper."

Powered by article was written by Jill Treanor, City editor, for on Tuesday 10th July 2012 12.29 Europe/London © Guardian News and Media Limited 2010


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