FSA chief under fire over Libor talks with Barclays

City Editor

Wednesday 18 July 2012

BANK chief executives will now fear being sacked after a couple of "bad dinners" with regulators, Treasury committee chairman Andrew Tyrie has warned.

MERVYN KING: Said Mr Agius's resignation was honourable but raised problems.

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TIM SHARP CITY EDITOR

Mr Tyrie spoke of his concerns over the use of "arbitrary power" after being told of conversations Barclays chairman Marcus Agius had with Financial Services Authority (FSA) chairman Lord Adair Turner and Bank of England Governor Sir Mervyn King.

The talks took place shortly after the bank was fined £290 million for manipulation of the London Interbank Offered Rate (Libor).Mr Agius resigned earlier this month soon after his meeting with Lord Turner. Chief executive Bob Diamond then followed suit just days later.Mr Tyrie warned FSA chairman Lord Turner at a committee hearing that his actions, which were not sanctioned by the board of the FSA, had set a precedent that might be used by a "dyspeptic" successor. He said: "This means that any chief executive may be hanging on a thread in case you had a couple of bad dinners with them."Mr Tyrie called for changes to the Financial Services Bill to improve corporate governance at the bank.However, he warned: "Whatever the merits of the action that was taken in this case, regulators should not be able to bring arbitrary pressure to bear on the boards of private companies.Lord Turner said he told Mr Agius that regulators were concerned about its management team.He said: "I said 'one thing you will have to think about is whether Bob as a brand is holed below the water'."Both Sir Mervyn and Lord Turner said that they were surprised by Mr Agius's decision to resign rather than engineer the departure of Mr Diamond.Mr Tyrie told Lord Turner: "You were handing the chairman of Barclays a revolver and you were telling him to shoot the chief executive."He added: "In fact what he did was took the revolver and shot himself."Lord Turner replied: "It was not what I was expecting him to do. "I do not think it was the most sensible decision in the circumstances."Sir Mervyn said that Mr Agius's resignation was honourable but put any successor in an unhappy position because they would have had to decide whether or not to demand that Mr Diamond go.Sir Mervyn said: "For many months the board of Barclays had been in something of a state of denial about the concerns of regulators."All of us involved had built up a concern. "It is possible to sail close to the wind once. You can sail close to the wind twice, maybe even three times. "But when it gets to four or five times, it becomes a regular pattern of behaviour, you do have to ask questions about the navigational skills of those on the bridge."Sir Mervyn also claimed he was not aware of deliberate rate-rigging until the full scale of the scandal came to light.Meanwhile, Business Secretary Vince Cable said yesterday that the sale of Royal Bank of Scotland could help to boost business lending.He said: "When action has to be taken on the future disposal of RBS we shouldn't simply consider it as an asset question, we should think about how it can be used positively to support business lending and create more effective business lending institutions."RBS, along with other British banks, is having its role in Libor setting investigated on either side of the Atlantic.The New York Times reported that court documents in Canada suggested RBS was resisting handing documents to competition officials, citing the restrictions of British law.

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FSA chief under fire over Libor talks with Barclays

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