Barclays Chairman Said to Be Poised to Resign After Libor Fine

By Howard Mustoe - Jul 2, 2012 6:01 AM GMT+0700

Barclays Plc (BARC) Chairman Marcus Agius plans to resign after the bank was fined a record 290 million pounds ($455 million) for trying to rig interest rates, sparking a political outcry, according to a person briefed on the matter.

An announcement may come as soon as today, said the person, who asked not to be identified because the move hasn’t been made public. Agius, 65, has been chairman of Britain’s second-largest bank by assets since January 2007.

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Barclays Plc Chairman Marcus Agius. Photographer: Brian Capon/British Bankers' Association via Bloomberg

He is the most senior executive to offer to step down following probes by global regulators into whether lenders colluded to manipulate Libor. Chief Executive Officer Robert Diamond remains under pressure from lawmakers after U.K. and U.S. regulators found the lender “systematically” attempted to rig the London and euro interbank offered rates for profit.

“Politicians will see this as him taking a bullet for Bob Diamond,” said Christopher Wheeler, a London-based banking analyst at Mediobanca SpA. “They realized they needed to do something, and Agius was chairman during the time they got fined for -- but will it be enough?”

Both Diamond and Agius have been called to appear this week before British lawmakers on the Treasury Select Committee. Separately, the U.K. government is preparing an inquiry into the future of Libor, including introducing criminal penalties for people who breach rules surrounding the rate, said a Treasury spokesman, who declined to be named citing government policy.

David Cameron

Prime Minister David Cameron on June 28 called for accountability to go “all the way to the top,” while opposition Labour Party leader Ed Miliband has called for a full inquiry into the industry’s practices.

Barclays has tumbled 17 percent since the fine was announced on June 27, making it this year’s worst performer in the five-member FTSE 350 banks index.

Diamond, who built up and ran the securities unit during the period being probed by regulators, may keep his job because he has no obvious successor, according to Chirantan Barua, an analyst at Sanford Bernstein Research in London. None of the bank’s largest shareholders have publicly called for Diamond’s resignation so far.

“Shareholders will be worried that if Bob goes, the stock may go down another 10 percent,” Wheeler said.

Diamond, 60, his three top lieutenants, Chief Operating Officer Jerry del Missier, Finance Director Chris Lucas and corporate and investment banking chief Rich Ricci have already forfeited their bonuses for this year following the fines.

Michael Rake

Agius is likely to be replaced by Michael Rake, Sky News reported yesterday. Rake, 64, is chairman of BT Group Plc and has been a director of Barclays since 2008. Officials at Barclays declined to comment.

Agius joined Barclays after a 34-year career at Lazard Ltd., where he had been chairman of the firm’s London unit. There, he advised on banking takeovers including Halifax Group Plc’s 2001 merger with Bank of Scotland to create HBOS Plc. As non-executive chairman of BAA Plc, Agius helped the owner of London’s Heathrow airport negotiate a higher takeover price from Grupo Ferrovial SA in 2006.

He had already faced investor pressure when the lender raised more than 5 billion pounds in 2008 from a group of funds from Abu Dhabi and Qatar without giving existing shareholders the opportunity to buy new stock. Shareholders including Legal & General Group Plc complained at the time their pre-emption rights had been ignored, and in protest about 16 percent of investors opposed Agius’s re-election as chairman in April 2009.

BBC, BBA

He also had to apologize to shareholders for failing to communicate the firm’s pay plans to investors clearly in April after 27 percent of shareholders voted against Diamond’s 12 million-pound compensation package.

Agius is also a board member of the British Broadcasting Corp. and chairman of the British Bankers’ Association, the industry lobby group that oversees Libor.

Libor is determined by about 18 banks’ daily estimates of how much it would cost them to borrow from one another for different time frames and in different currencies. Because banks’ submissions aren’t based on real trades, the potential exists for the benchmark to be manipulated by traders.

At least a dozen firms, including Citigroup Inc., Royal Bank of Scotland Group Plc and UBS AG, are being probed by regulators worldwide for colluding to rig the rate, the benchmark for more than $360 trillion of securities, including mortgages, student loans and swaps.

False Submissions

Barclays traders routinely coordinated with counterparts from at least four other banks in an attempt to move interest rate benchmarks, according to documents released on June 27 by the U.S. Commodity Futures Trading Commission, the U.S. Justice Department and the U.K. Financial Services Authority.

Derivatives traders requested the false submissions in the Libor and Euribor setting process, as they were “motivated by profit and sought to benefit Barclays’ trading positions,” the U.K. Financial Services Authority said.

Andrew Tyrie, the chairman of Parliament’s Treasury committee, said Diamond will have to answer questions about who profited from the firm’s false submissions and who at Barclays knew about them, according to an interview with the Daily Mail.

“There appear to have been at least two motives for the rigging of Libor,” Tyrie was cited as saying in the interview. “The first was to enable traders to make a profit. The second was to support share prices at a crucial time -- and that is something that might reasonably be considered the responsibility of the relevant companies as a whole.”

SFO Probe?

The U.K. Serious Fraud Office is considering whether to open a formal investigation, its spokesman said last week. The U.S. Justice Department is conducting its own criminal probe into the attempted manipulation of interbank offered rates.

FSA Chairman Adair Turner said yesterday the Barclays fine shows regulator needs more powers to bring criminal charges.

“Further steps were made a few years ago to give us the ability to bring criminal charges in particular areas of market abuse, but they did not cover the Libor market,” Turner said in an interview on the British Broadcasting Corp.’s “Andrew Marr Show.” “We now have to look further and see whether we should strengthen these powers considerably.”

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net