Former Barclays CEO Bob Diamond is under questioning from a parliamentary committee regarding the 2008 banking scandal.
July 5, 2012- The former CEO of Barclays, Bob Diamond, who resigned over the scandal involving marketing-fixing, said that an official of the Bank of England did not encourage him to report data the was false during the heat of the 2008 credit crunch.
On Tuesday, Diamond resigned from the bank and on Wednesday was asked a number of questions by a parliamentary committee, over his talks with Bank of England deputy governor Paul Tucker in October of 2008. Barclays disclosed the conversation on Tuesday. The conversation is the focus of questions about false data that Barclays submitted from 2005 to 2009, which last week earned them a fine by British and U.S. authorities of $453 million.
The question is a crucial one in the development of the scandal because it would help determine whether authorities in Britain had been encouraging banks to report rates that were lower than the actual borrowing rates so as to ease any market concerns over the financial health of the bank.
On a daily basis, banks borrow from one another and report the rate they received the money. A higher rate could indicate the bank has trouble borrowing because it could be experiencing financial problems. Those reports form a benchmark interest rate known as the LIBOR or London interbank offered rate. The rate is used to price mortgage and business loans worldwide.
Diamond, in his testimony, said he did not feel a conversation between he and Tucker contained any order or encouragement on Tucker’s part about lowering the borrowing rates. Diamond said one of his subordinates misunderstood the contents of the memo and ordered the reported rates to be lowered.