Impeccable manners can get one a long way. In sharp contrast to the faux familiarity displayed by the hard-charging investment banker Bob Diamond to the Treasury Select Committee investigating Barclays role in the LIBOR rate-rigging scandal, the chairman of the bank, Marcus Agius, was deferential and apologetic. Mr Agius, who had offered to resign to order to protect the tenure of the chief executive officer whose appointment he had secured, accepted on more than one occasion in testimony that criminality - which has not been proven - had occurred.
While absolving Mr Diamond of any direct or indirect complicity in the scandal and shining partial light on the failure of compliance within the bank, he was at a loss to explain how the activity could have continued for so long. Despite expending over $150 million on an internal investigation, which appears to have placed the blame on the egregious behaviour of individual traders far down the chain of command, Mr Agius was unable to explain how compliance had changed within the bank. Nor was he able to provide a convincing definition of what constituted culture, beyond a rather anodyne reference to the institutional embedding of instinctive (and presumably learnt and materially rewarded) behaviour.
What he did do, however, was demonstrate conclusively the cavernous gap between corporate and regulatory elites and an increasingly restive polity, angered at the cost of bailing out the banks. In the process he revealed much about the factors that have led to such an erosion of trust: the lack of responsibility, symbolic rather than material accountability and a superficial commitment to tangible reform.
Mr Agius came to the hearing armed with the announcement that Mr Diamond was to voluntarily forgo more than $30 million in bonus payments. Instead, he would exit with a package worth $3.1 million, itself nearly 100 times the average UK industrial wage. The bank chairman thought it necessary to ensure ongoing cordial relations with the former chief executive officer because of his standing and likely appointment in another sector of the industry once the fuss had died down. The suggestion raised eyebrows at the Treasury Select Committee, where parliamentarians repeatedly expressed incredulity that Mr Diamond would be paid anything at all.
Mr Agius was more successful in detailing the circumstances that led to Mr Diamond’s removal from office. What had been presented as a voluntary departure was, it became clear, nothing of the sort. In extraordinary detail, the bank chairman, who had voluntarily decided to resign, explained that the Governor of the Bank of England made it clear to Barclays that the regulators had lost confidence in Mr Diamond’s stewardship. Mr Agius conveyed the message to the chief executive in the presence of a senior independent director. When asked by the TSC whether they had in effect handed a loaded gun to the American banker, he replied that he left the meeting in no doubt that Mr Diamond would do the right thing. Chivalry, it appears, remains intact. Or does it?
Throughout his testimony, Mr Agius made it clear that Barclays had cooperated with regulatory authorities. This was presented as a badge of honour. He explained that the bank had thought the remedial actions taken were appropriate. These included handing over the results of an $150 million internal investigation, compiled with the help of external counsel, paid for by the bank. At no stage did he reflect (or was forced to consider) a glaring conflict of interest. It is in the bank’s interest to fashion a narrative that blames failure on rogue traders far removed from the executive suite. The fact that the board was unaware of the risk of manipulation even and especially when LIBOR was used as a proxy for banking health in 2008 was a failure of internal systems, rather than a failure of leadership.
While apologetic for the failure, it was not one for which he could be held responsible. Ignorance, it seems, has value in the boardroom. Just as he brushed aside questions about Mr Diamond’s potential involvement in a prior scandal involving the misclassification of Russian debt (on the basis that he did not know the details), so too he evaded responsibility for the elevation of a former senior investment banker named but not charged in the investigation to chief operating officer just days before the release of the final notice that saw the bank pay $454 million in fines for manipulating LIBOR. The decision, he argued, was one that regulatory authorities had acquiesced to. If so, it raises a series of uncomfortable questions for the Financial Services Authority, senior representatives of which are to appear at Westminster next week.
Mr Agius was thanked for his candour, amid suggestions from various committee members that they had been misled by Bob Diamond, who has forcefully rejected the insinuation. Mr Agius may have disarmed the TSC for now. For how long remains very much an open question.