del Missier faces House scrutiny

Former Barclays COO indicates he received instructions from ex-CEO Diamond to lower rates

Jerry del Missier, a former senior Barclays executive, faced tough questioning on Monday about his role in the bank’s rate-manipulation scandal during a tense Parliamentary hearing, indicating that he had instructed bank employees to report lower rates at the behest of regulators.

del Missier, 50, stepped down from the British bank in early July, shortly after Barclays settled authorities’ claims that it submitted false rates to improve its earnings and deflect concerns about its financial health.

The case centres on a key benchmark known as the London interbank offered rate, or Libor. The rate is used to help determine the pricing for trillions of dollars of financial products, including home loans and credit cards.

 

On Monday, the Canadian-born del Missier, a top deputy of the former Barclays chief executive Robert E Diamond Jr, faced questions from British politicians about whether he directed employees to report artificially low rates. In testimony, del Missier indicated that he had received instructions from Diamond to lower the rates, following the chief’s discussions with bank regulators on the matter.

In 2008, Diamond sent del Missier and another senior executive an email regarding the government’s concerns about Barclays Libor rates. The former Barclays chief also talked to del Missier on the phone about the issue, according to del Missier’s testimony on Monday.

The email detailed a conversation between the former Barclays chief and Paul Tucker, deputy governor of the Bank of England, the country’s central bank.

The two men discussed the bank’s financial position at the height of the financial crisis. After receiving the email, del Missier instructed Barclays’ officials on October 29, 2008 to lower the bank’s Libor submissions in line with rivals, according to regulatory filings.

In testimony, del Missier said he had acted in response to the conversation with Diamond. del Missier said that he believed that senior government officials had instructed the bank to alter the rates. The executive, however, did not speak to anyone at the Bank of England or other senior regulators about the issue.

“I expected that the Bank of England’s views would be incorporated into our Libor submissions,” said del Missier during his testimony on Monday. “The views would have resulted in lower submissions.”

In late June, Barclays agreed to a $450-million settlement with American and British authorities about the manipulation of Libor. According to regulatory documents, a number of the bank’s traders and some senior executives had altered the firm’s submissions to the rate for their own benefit between 2005 and 2009.

Several of Barclays’ top executives, including Diamond, del Missier and the bank’s chairman, Marcus Agius, have resigned in the wake of the scandal.

del Missier’s testimony appears to contradict earlier statements by Tucker, the Bank of England deputy governor.

Tucker told the same parliamentary committee last week that his conversation with Diamond, Barclays’ former chief executive, was related to fears that the financial markets might view Barclays to be at risk if its Libor submissions continued to be higher than those of other international banks.

Tucker said he called Diamond to remind the Barclays chief that people in the markets were questioning whether the British bank had access to capital. In the aftermath of the collapse of Lehman Brothers in 2008, officials worried that the British bank might have to been bailed out if the financial markets perceived the firm was a credit risk.

“I wanted to make sure that Barclays’ day-to-day funding issues didn’t push it over the cliff,” Tucker told the parliamentary committee last week.

The testimony by del Missier also follows statements from Diamond that he never told his deputies to report false Libor rates. Diamond said his discussions were misinterpreted.

del Missier, however, said the email outlining the conversation with Tucker that Diamond represented an instruction from government officials to alter Barclays’ Libor submissions.

During his one-hour long testimony, del Missier said he would not have instructed Barclays officials to lower the rate if he had not been asked to by senior British government officials. He also told the committee he never followed up with the Barclays officials about the impact of lowering the submissions

British politicians repeatedly asked him whether the lowering of Barclays’ Libor submissions in line with other rivlas was illegal, improper and wrongful.

“It didn’t seem an inappropriate action given it was taken from the Bank of England,” he said.

British lawmakers repeatedly asked del Missier why he was not aware of the manipulation of Libor at the British bank, which dated back to 2005. The former top senior executive said he was not aware of the activity at Barclays until the beginning of 2010.

Barclays was “up to its armpits in dishonest activity in the run up to that phone call,” Pat McFadden, a British politician who sits on the committee overseeing the testimony, said in reference to Diamond’s phone call with Tucker in 2008.

The banker’s career mirrors the rise of Barclays Capital, the firm’s investment banking division. del Missier joined the bank in the late 1990s, and became co-chief executive of the investment banking division in 2009 after holding several senior positions at the British bank.

del Missier refuted lawmakers accusations that he was taking responsibility for the rate manipulation in an effort to save Diamond’s reputation.

“I’m not the fall guy for anything,” he said. “I have resigned my position for the good of the bank.”

© 2012 The New York Times News Service