Market value of Barclays plunges £3bn

UK Political Correspondent

Friday 29 June 2012

BILLIONS of pounds were dramatically wiped off the value of Barclays shares yesterday amid fears banks could have to compensate customers for the interest rate-rigging scandal.

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Kate Devlin UK Political Correspondent

Taxpayer-owned RBS also lost heavily as the markets reacted badly to fears other institutions could be caught up in the crisis.

As pressure grew on Barclays boss Bob Diamond to resign in the wake of the bank's record £290m fines in the UK and US, experts warned that UK banks could face compensation claims totalling billions from institutional investors.

There were also concerns it could prove impossible to tell how much individual customers were affected by artificially inflated borrowing costs as a result of the rate fixing. As criticism grew over the UK Government's response to a series of banking scandals, ministers confirmed they will next week set out plans to sanction bosses who preside over bank failures.Last night David Cameron also increased pressure on Barclays's embattled chief executive Mr Diamond, saying responsibility for the current scandal went "all the way to the top".LibDem Business Secretary Vince Cable also raised the prospect he could strip Mr Diamond of his directorship, although he admitted that this would be only as a last resort. However, fears grew that many of those responsible could escape prosecution as it emerged that rigging the specific rate at which banks lend to each other was not a criminal offence.Chancellor George Osborne said he would "urgently" look at the need to rectify the law to allow regulators to launch criminal investigations into rate fixing.He also announced plans to ensure the £60 million fine levied against Barclays by the Financial Services Authority (FSA) went to the taxpayer and not into the coffers of other banks. As it stands, the money will be used to reduce the amount other institutions pay towards the FSA's running costs.Mr Osborne told MPs that this week's report laying bare the scale of the rate-fixing scandal was a "shocking indictment of the culture at banks like Barclays in the run-up to the financial crisis".He also confirmed RBS, still mainly owned by the taxpayer, was also being investigated alongside HSBC, UBS and Citigroup. Earlier in the day, Mr Cameron had said that the whole management team of Barclays had "serious questions to answer". However, as he arrived for a European leaders' meeting in Brussels he appeared to ramp up the pressure on Mr Diamond, saying that responsibility for the scandal went "all the way to the top of the organisation". Consumer champion Which? has called for borrowers to be compensated if it is proved they were affected by artificially high interest rates. Pensions groups have demanded a "clawback" of millions of pounds in executive bonuses paid out in the years they were manipulating the interbank lending rates. Sandy Chen, banking analyst at Cenkos Securities, also predicted billions of pounds in compensation and fines to UK banks. He said: "We are pencilling in multi-year provisions that could run into the billions."Last night Barclays shares finished the day more than 15% down, with more than £3 billion wiped off their value in a single day. RBS shares finished the day down 11%. Labour and the Conservatives attempted to blame each other for the scandal. There was surprise last night, however, when a Labour peer admitted it was his party's fault criminal charges could not be brought. Lord Tunnicliffe said: "Yes, OK, it's our fault."He later issued a statement denying Labour was to blame in which he said: "I've now looked into this matter and I was wrong."

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Market value of Barclays plunges £3bn

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