The Barclays Resignations Continue

Receiving Wide Coverage ...

Diamond in the Rough: It has been a bad run for bank bosses with homophones for names, but especially for former Barclays CEO Bob Diamond, who resigned early today over the Libor scandal. Diamond said: "The external pressure placed on Barclays has reached a level that risks damaging the franchise. I cannot let that happen." The Journal said Diamond's exit could portend a turn away from his focus on expanding the company's capital markets business, which absorbed the North American operations of Lehman Brothers after that firm collapsed in 2008. The question of who to name as a successor will hinge in part on "whether the bank's board wants to continue with Mr. Diamond's drive to build out Barclays's investment banking arm. His departure could herald the splitting off or winding down of the unit as the bank looks to cut costs and adapt to tougher regulations, analysts say. The U.K. is set to pass laws in 2015 forcing banks to ring-fence their retail banking divisions from investment banking activities—a move that could drive up funding costs." Wall Street Journal, New York Times, Financial Times

Meanwhile, the Journal reported that 16 banks, including B of A, Citi and JPMorgan Chase, are seeking the dismissal of class-action litigation that accuses them of acting together to rig Libor. The banks' filings "provide a first look at how banks may seek to defend themselves against damage claims that experts say could reach hundreds of billions of dollars, given the prevalent use of Libor in setting rates on everything from consumer loan securitizations to sophisticated interest rate derivative products."

Diamond may have been too busy packing up his office to read this item in FT, which set out the case for him staying on the job. For one thing, Barclays was "swift and proactive" in reporting an earlier case of Libor manipulation involving "rogue traders abusing the system for their own enrichment." Another defense is less rousing: "everybody knew the Libor rate was being manipulated as concerns mounted about banks' financial stability in the heat of the crisis. Central bankers around the world, according to bank executives and regulators, had long been aware of this, but condoned it because they realised that if banks admitted to the real, in many cases far higher, interbank borrowing costs, that could be counterproductive, potentially destabilising the system."

Also in FT, Gillian Tett suggested that Barclays could take heart from the 16 years it took IBM to restore its reputation among consumers. For banks, however, such a transit would require things like "more sensible—modest—pay structures" and replacing opaque corners of the financial world with transparency.

Editorials in the Times and FT were both unsatisfied with the earlier resignation of Barclays' former chairman, Marcus Agius. The Times said that the Justice Department's agreement not to prosecute Barclays itself because of its cooperation "makes sense only if that cooperation will allow prosecutors to nail other banks that have been involved in setting the rates, including potential cases against Citigroup, JPMorgan Chase and HSBC, and people who work there." New York Times, Financial Times

Wall Street Journal