Barclays boss Bob Diamond finally quits in interest rate fixing scandal but will KEEP his £22.9m share package (and who else will he take with him?)
- Mr Diamond to appear before Treasury Select Committee tomorrow
- He earned a staggering £18m last year and has a £105m fortune
- American, 60, to receive staggering 13.2million shares worth £22.9million
- He was once described as the 'unacceptable face of banking' by Lord Mandelson
- George Osborne describes resignation as the 'right decision for the country'
- Chairman Marcus Agius - who also announced he was standing down yesterday - will stay on to find new chief executive
- Shares rise this morning after chief-executive's regulation
- Barclays refuse to comment on rumours chief operating officer Jerry del Missier will follow Bob Diamond out the door
By Rob Cooper
PUBLISHED: 06:40 GMT, 3 July 2012 | UPDATED: 10:59 GMT, 3 July 2012
Resignation: Bob Diamond this morning stood down as boss of Barclays
Barclays chief executive Bob Diamond finally succumbed to massive political and shareholder pressure today and resigned after the bank was fined for attempting to rig lending rates.
The American financier, 60, is in line to pocket 13.2million shares worth £22.9million - which he is entitled to because he has served for more than 15 years.
Barclays said Mr Diamond's severance package was 'still under discussion'. He could also receive a year's salary worth £1.35million and walk away with a fat pension as yet undisclosed.
However, the board will be under pressure to reduce the pay off given to Mr Diamond who earned £18million last year.
Mr Diamond said he was standing down because: 'The external pressure placed on Barclays has reached a level that risks damaging the franchise.'
He will tomorrow give explosive details of the bank's dealings with regulators when he appears before MPs.
Sources close to the financier said: ‘If he is attacked, he will fight back.’
His resignation shocked the City this morning just a day after chairman Marcus Agius said he was standing down over the affair in a move widely seen as attempting to divert attention away from the chief executive.
It is believed that shareholder attempts to claw back bonuses yesterday was the last straw for the banker.
A source at Barclays told Robert Peston at the BBC that he felt 'hounded out by MPs' and was convinced his job would become dominated by a parliamentary inquiry into banking.
He Tweeted: 'Diamond feels he has been hounded out by MPs. He feared the new inquiries would focus on him & would not give him no time to fix the bank.'
George Osborne said Mr Diamond's resignation was 'the right decision for Barclays' and the 'right decision for the country'.
The Chancellor added: 'I think and I hope that it is the first step towards a new culture of responsibility in British banking.'
- Bob Diamond's colossal wealth: How the Barclays boss in the eye of the Libor storm built a £105m fortune
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- Bankers to be grilled under oath: Osborne rejects judicial probe in favour of 6-month Parliamentary investigation
- Peston strikes again: BBC's star reporter at centre of latest financial crisis (but how DID he get inside scoop on Barclays fixing scandal?)
- I'm sorry and angry... but don't blame me, says Diamond in letter to Barclays staff
- Now Labour is dragged into bank rate scandal as leaked documents show Brown's baroness proposed scheme to drive down rates
The move comes after Barclays was fined £290 million by UK and US regulators for manipulating the Libor, the rate at which banks lend to each other.
The American, with an estimated £105million fortune, became the poster boy for casino banking and was once dubbed the 'unacceptable face of banking' by Lord Mandelson.
The banker, a Chelsea supporter who has become a British citizen, was photographed with John Terry grinning as he held the FA Cup in the team's dressing room at Wembley.
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'Unacceptable face of banking': Bob Diamond lifts the FA Cup with Chelsea captain John Terry in the Wembley changing room. His daughter posted the picture on Twitter
It was reported today that Mr Diamond decided to resign last night after assessing the reaction to Mr Agius' decision to quit.
Barclays refused to comment on reports that chief operating officer Jerry del Missier, who was co-president of the bank's investment arm Barclays Capital at the time of the Libor-fixing claims, is also set to resign.
Mr del Missier took up his current position in June 2012 after spending three years as co-chief executive of corporate and investment banking.
Mr Diamond will be grilled in the Commons by the Treasury Select Committee tomorrow and the details could be highly embarrassing for regulators with increasing speculation that they were aware of the bank’s practices but failed to act.
His resignation will leave him free to speak openly about what went on at the bank.
Mr Diamond is said to be furious that he and the bank have been blamed for ‘lowballing’ the rates at which Barclays said it could borrow from rivals.
Bankers insist the authorities knew these rates were inaccurate but did not act because they feared the truth would destabilise the markets. It is also claimed that regulators possessed evidence of rate-fixing.
The Chancellor yesterday unveiled a parliamentary review, led by Treasury Select Committee chairman Andrew Tyrie, which will look at 'transparency, conflicts of interest, culture and the professional standards' in the banking industry.
Mr Diamond's departure also comes after the Bank of England was drawn into the rate-fixing affair when it emerged that staff mistakenly thought they were instructed by the central bank to lie in their rate submissions.
Jet set lifestyle: Bob Diamond talks to Tiger Woods on the first tee at a golf event sponsored by Barclays
PRESSURE ON BOARD TO CLAW BACK BOB'S SHARES
The board of Barclays will face pressure to curb Bob Diamond's exit pay deal which could run to around £20million despite him having to resign to avoid damaging the bank's reputation.
Mr Diamond seems likely to pick up one year of salary worth £1.35million, as well as £2.3million of 'capital contingent awards' from the Bank.
But there is less certainty around the huge potential share awards built up by Mr Diamond, thought to total in excess of £20million.
These shares were issued in previous years and cannot be vested for an agreed period, with the potential for awards to be clawed back in the event conditions are not met. Such awards have been structured in this way since the financial crisis to incentivise better behaviour and less short-termism among executives.
It will now fall on Barclays board to decide if it is appropriate to claw back all or some of the shares that are worth in the region of £20million based on current prices.
The bank stressed this morning that Mr Diamond enjoyed the full support of the board at the time of his resignation - despite Mr Diamond's own analysis that he could not continue in the role because pressure had reached 'a level that risks damaging the franchise'.
Pay awards from previous years were issued on the basis of the bank's profitability. Board members may decide against clawing back shares on the basis that Libor manipulation did not impact upon the profitability.
The Financial Services Authority's report said there had been a misunderstanding arising from a conversation between Bank Deputy Governor Paul Tucker, a favourite for the Governor role, and an unidentified senior Barclays manager on October 29 2008.
Mr Diamond, who joined the bank 16 years ago, said in his resignation statement today: 'I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth.'
'My motivation has always been to do what I believed to be in the best interests of Barclays. No decision over that period was as hard as the one that I make now to stand down as chief executive.'
He went on: 'I know that each and every one of the people at Barclays works hard every day to serve our customers and clients. That is how we support economic growth and the communities in which we live and work.'
He added: 'I leave behind an extraordinarily talented management team that I know is well placed to help the business emerge from this difficult period as one of the leaders in the global banking industry.'
Mr Osborne acknowledged that the Government had had 'conversations' with the bank but denied ministers were responsible for Mr Diamond falling on his sword.
The Chancellor added: 'I was very clear that it was not the job of the Chancellor of the Exchequer or the Prime Minister or anyone else in the Government to make a decision about who ran, in effect, a private company, Barclays,' he said.
'This is ultimately a decision for the board of Barclays. Obviously we have had conversations over the last few days with Barclays Bank. But this is, as I say, ultimately a decision for their board.'
The Chancellor said British banks are 'broken' but there was now an opportunity to 'fix' what has gone wrong in the industry.
Fallen on their swords: Bob Diamond (centre) and chairman Marcus Agius (right), pictured here with former chief-executive John Varley, have both resigned over the Libor rate scandal
DIAMOND FALLS ON HIS SWORD: HIS RESIGNATION STATEMENT IN FULL
'I joined Barclays 16 years ago because I saw an opportunity to build a world-class investment banking business.
'Since then, I have had the privilege of working with some of the most talented, client-focused and diligent people that I have ever come across.
'We built world-class businesses together and added our own distinctive chapter to the long and proud history of Barclays. My motivation has always been to do what I believed to be in the best interests of Barclays.
'No decision over that period was as hard as the one that I make now to stand down as chief executive. The external pressure placed on Barclays has reached a level that risks damaging the franchise - I cannot let that happen.
'I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth.
'I know that each and every one of the people at Barclays works hard every day to serve our customers and clients. That is how we support economic growth and the communities in which we live and work.
'I look forward to fulfilling my obligation to contribute to the Treasury Committee's inquiries related to the settlements that Barclays announced last week without my leadership in question.
'I leave behind an extraordinarily talented management team that I know is well placed to help the business emerge from this difficult period as one of the leaders in the global banking industry.'
He added: 'I think he (Mr Diamond) has clearly taken the view that Barclays has a better future without him than with him.'
Asked about chairman Marcus Agius, who announced his resignation as yesterday but today said he would lead the search to find Mr Diamond's replacement, the Chancellor said: 'I don't think you want at this moment in time a leaderless Barclays.'
Mr Osborne said bankers involved in the manipulation of the rate 'may well stand in the dock' and insisted the Government would give a new watchdog tough powers to tackle fraudulent practices.
'There is a serious fraud investigation taking place. Unfortunately the Financial Services Authority, which conducted this investigation, felt it did not have the criminal powers to undertake a criminal investigation.
'One of the things we are urgently doing now is looking at what powers to give (a new) body before it is created next year.'
He added: 'I think it should have these new powers and that is basically what we intend to do.'
Labour leader Ed Miliband said: 'This was necessary and right. It was clear Bob Diamond was not the man to lead the change that Barclays needed.
'But this is about more than one man - this is about the culture and practices of the entire banking system, which is why we need an independent, open, judge-led public inquiry.'
Deputy Prime Minister Nick Clegg said of Mr Diamond's move: 'This was the right decision on his part.
'People will now want us to get on with the inquiry and take further action fast to ensure that people and businesses are protected.'
Since January 2011, Barclays has been found guilty of ripping off the elderly, avoiding up to £500million in tax, manipulating interest rates, mis-selling payment protection insurance and systematically exploiting small firms with the sale of complex loans.
Chairman Mr Agius will now stay on temporarily to lead the search for a new chief executive, Barclays said.
He said: 'Bob Diamond has made an enormous contribution to Barclays over the last 16 years of distinguished service to the group, building Barclays Investment Bank into one of the leading global investment banks in the world. As chief executive he has led the bank superbly.'
Following Mr Diamond's resignation, shares fell 3 percent in early trading but then rose two percent as investors reacted positively to the move.
'Unacceptable face of banking': Bob Diamond, 60, with his wife Jennifer at a lunch last year
DID FIXING SCANDAL TRIGGER HOME REPOSSESSIONS?
The Libor-fixing scandal may have increased the number of home repossessions, Housing Minister Grant Shapps said yesterday.
Mr Shapps was responding to a question in the Commons from Labour MP Simon Danczuk, who asked him if there was a link.
He replied: ‘All the research into homelessness proves that there are a lot of different causes, of which the Libor rate may have (been) a contributory factor, if indeed it transpires that mortgage rates have been adjusted as a result.’
Last night, the Department for Communities and Local Government said: ‘Clearly the mortgage rates paid by millions of homeowners may have been affected by the actions of these traders as they manipulated the Libor rates up and down depending on their trading position – and this could have put pressure on struggling households.’
Lord Oakeshott, the former Liberal Democrat Treasury spokesman, this morning described the banker's resignation as great for democracy.
'Bob Diamond's departure is a great day for democracy. He is the symbol of the gambling and greed we must root out of our banking system.
'Now the top priority is to catch the criminals, break off the casinos from the basic banks and make them lend.
'We must never again let the rich and powerful in the City or the media get their hands round the windpipe of Government.'
Mr Diamond had yesterday tried to distance himself from the unfolding scandal, insisting: 'We know that a small minority have let us down.'
Ian Gordon, an analyst at Investec, said: 'We are disappointed by Bob's resignation this morning.
'With Bob gone, expect increased recognition that the Libor investigation is a multi-bank issue rather than Barclays-specific.
'If there is "new news" to share - whether embarrassing to UK regulators or otherwise - Bob can now speak more freely at the Select Committee show-trial tomorrow.'
Yesterday Mr Agius also said he was 'truly sorry' that the bank's customers, clients, staff and shareholders have been 'let down'.
He also quit as chairman of the embattled British Bankers' Association, and sources said his non-executive position at the BBC might not last much longer.
A BBC spokesman said: 'Marcus Agius is currently serving his second three-year term as the senior non-executive director on the BBC's executive board.
He will continue to discharge his duties until his second term expires in November.'
It is understood he is likely to stand down and will not serve a third term.
Mr Agius, who was paid £751,000 by Barclays, admitted the Libor scandal had 'dealt a devastating blow to Barclays reputation', adding: 'The buck stops with me.'
Casino banker: Chelsea fan Bob Diamond joins in the celebrations, right, as the west London team lift the Premier League trophy in 2005
THE MAN CRITICISED AS THE 'UNACCEPTABLE FACE OF BANKING'
A new start: Bob Diamond was named as the bank's chief executive in September 2010
As one of the world's richest and most successful bankers, former Barclays boss Bob Diamond has never strayed too far from the public gaze.
The American was once described by Lord Mandelson as the "unacceptable face of banking" due to his lavish pay deals and has amassed an estimated fortune of around £105 million.
Mr Diamond, who was appointed chief executive on January 1 last year, picked up a salary of £1.3 million and was reportedly in line to receive £11million in payouts this year before waiving his annual bonus in the wake of the rate-rigging scandal.
Within days of starting the top job at Barclays, and having passed up his bonus handout in 2009 and 2010, he angered some MPs last year by saying the time for 'remorse and apology' needed to be over as banks looked to support Britain's recovery.
Mr Diamond's highest-profile deal was Barclays' controversial acquisition of the brokerage arm of US bank Lehman Brothers for 1.7 billion US dollars (£1.1 billion) after it collapsed in 2008.
In June 2010, Mr Diamond faced a federal court hearing in Manhattan, which was looking into allegations that Barclays duped Lehman Brothers out of billions of dollars during the deal.
It is largely down to Mr Diamond's Barclays Capital division that the UK bank avoided state assistance during the credit crunch, although market turmoil has dented his former division's profits in recent months.
Prior to joining Barclays in 1996, Mr Diamond held senior leadership roles at Credit Suisse First Boston in Tokyo and New York, and at Morgan Stanley International.
Mr Diamond, now a UK citizen, grew up in Massachusetts as one of nine children of schoolteacher parents.
He started his working life as an academic, lecturing at the University of Connecticut's Business School in 1976.
The married father-of-three is known for his love of sport. He supports Chelsea but remains a devoted fan of American football team the New England Patriots.
He sits on the board of Old Vic Productions, alongside Dame Judi Dench, and is a trustee of the Mayor's Fund for London and a member of the British-American Business Council.
He still retains his links to the US, where he is chairman of the board of trustees at his old college and has also set up the Diamond Family Foundation which has given millions of dollars to education projects.
Mr Diamond made his name and much of his reported £105m fortune in the Barclays Capital arm of the bank that is at the heart of the bank's part in the Libor scandal.
His personal fortune was estimated at £105m in the Sunday Times Rich List and the sale of Barclays’ fund management arm Barclays Global Investors made him £26m in 2009.
He has a property portfolio worth an estimated £30million, including a £4million mansion on Nantucket, an exclusive New England island.
In March this year, it was revealed that in 2011 Mr Diamond’s base salary was £1.35m, rising to £6.3m with bonuses, but in total he got £17m, once salary, bonuses, shares, perks and his tax bill consideration were included.
Banker: Bob Diamond during a Pro-Am before the Barclays Scottish Open at Loch Lomond in July 2010
But even before he was elevated to the bank's main board in 2005 he is thought to have made tens of millions from an obscure share scheme run by one of Barclays’ offshoots.
This was the lucrative BGI share scheme for executives and investment stars introduced at the turn of the century.
They got options over shares in BGI – the right to buy at an agreed price in the future – the idea being that this enable staff to share in success, as if the business did well the shares would rise in value and so could be picked up cheap at the option price.
In the six years that followed the introduction of this ‘equity ownership plan’, employees at BGI picked up £1.26bn by cashing in their share options.
The £4million mansion home of Bob Diamond on Nantucket, an exclusive New England island
In the first half of 2006 alone, BGI employees spent £26m as they exercised share options which they were then able to sell back to Barclays for a total of £211m. Exact details were not included in the annual report of the main Barclays Group and as there was no open market in BGI shares, their price and therefore the profits being made was determined internally.
Diamond’s earnings throughout the BGI years are unclear as they are not on public record.
But in 2009, Barclays agreed to sell BGI to US fund management house Blackrock for £8.2bn and it emerged that Diamond had BGI shares worth almost £27m under options for which he had paid just £6m.
All of this contributed to Diamond being branded the ‘unacceptable face of banking’ by Peter Mandelson, strong words from a man not averse to the attractions of wealth himself.
Sir Richard Branson has called for British banks to 'turn over a new leaf' in the wake of Bob Diamond's resignation.
The former home of Bob Diamond in Kensington, London, which he made a large profit from selling in 2008
Asked about Mr Diamond's resignation, Sir Richard said he was saddened by the former Barclays chief executive's fall from grace.
Sir Richard said: 'The reputation of the City obviously has been damaged which is very sad because the UK economy depends on the banking world for the building of the hospitals, the building of schools and so on, so it is important that banks pull themselves together and get back on track as soon as possible.
'I think the banks have just got to turn over a new leaf.'
Unite national officer David Fleming said: 'There is no doubt that he accepted the rapacious greed of a number of traders and key operators in the Barclays investment arm.
'It would add further offence if he was granted a golden goodbye on departure.
'Whoever succeeds Bob Diamond must put the livelihoods of the workforce, the thousands of innocent workers who deal with customers every day, at the heart of rebuilding trust in Barclays.
'Let's not forget that these workers who must now pick up the pieces of this latest banking scandal tend to be low paid and working under intense pressure.
'This nation has no chance of getting a grip of the banks if those who play fast and loose with the rules do so with impunity.'
LIBOR: THE 'GLOBAL ECONOMY'S PULSE-RATE'
WHAT IS LIBOR?
It stands for the London interbank offer rate and is the interest banks charge to borrow from each other. Banks rely on this money to lend to customers and businesses. Its equivalent in Europe is called Euribor.
The rate is set every morning by a panel of banks and overseen by trade body the British Bankers’ Association. Each bank sets the rates at which it believes it can borrow, from overnight to 12 months. There are 150 Libor rates, spanning ten currencies and 15 time periods.
HOW DOES IT AFFECT ME?
HOW DOES IT AFFECT ME?
The rate banks pay to raise money affects how much they charge on loans and mortgages. An increase in Libor can add hundreds of pounds to households’ annual mortgage repayments or a loan to a small business.
This was seen with dramatic effect in the run up to the financial crisis, when Libor soared and lenders raised their rates. It is also used as the benchmark for trillions of pounds in complex financial investments.
Three-month sterling Libor from 2006 to 2012: The rate broadly runs in line with the UK base rate except for the crunch period in 2008 and in recent months
WHAT DID BARCLAYS DO?
WHAT DID BARCLAYS DO?
Barclays’ traders speculating on movements in interest rates were manipulating Libor in an effort to make huge profits.
Its traders were conspiring with the ‘submitters’ at the bank which lodge their Libor rates every morning. Depending on the way they were betting, traders would urge these submitters to increase the Libor rate or lower it.
Barclays’ traders also conspired with ex-employees working at other banks to try to influence their Libor submissions. During the financial crisis Barclays also fiddled the figures to dupe the market into thinking it was more financially sound than it was.
Libor is often seen as a barometer of how healthy a bank is. Just as customers with bad credit records have to pay higher interest rates, banks which are deemed in poor financial health are charged more to borrow.
Barclays became anxious that its Libor rate was higher than many of its peers and that they were fiddling the figures. It decided to join the party.
BARCLAYS BOSS FINALLY FALLS ON HIS SWORD: THE TIMELINE OF EVENTS THAT LED UP TO BOB DIAMOND'S RESIGNATION
Wednesday June 27: The banking industry is engulfed in a fresh scandal after Barclays pays £290 million to settle claims that it used underhand tactics to try to rig financial markets.
The penalties from UK and US regulators, including a record £59.5 million fine from the Financial Services Authority (FSA), follow allegations it manipulated Libor and Euribor interbank lending, which govern the rates at which banks are prepared to lend to each other in the wholesale money markets.
In the depths of the financial crisis, Barclays gave false information about the interest rates it had to pay to borrow money in an effort to paint a false picture of its health to markets.
Chief executive Bob Diamond, who was in charge of Barclays Capital at the time the breaches occurred between 2005 and 2009, apologises and says he and three other key executives would waive their bonuses for this year.
Thursday June 28: After fining Barclays, the FSA is investigating several other lenders including HSBC and taxpayer-backed Royal Bank of Scotland.
Serious Fraud Office investigators are in talks with the FSA over the scandal while pressure is mounting on Mr Diamond to stand down.
Friday June 29: A fresh mis-selling scandal caps a nightmare week for the banking industry, as the FSA announces it has found 'serious failings' in the sale of complex interest rate hedging products to some small and medium-sized businesses (SMEs).
It reaches agreement with Barclays, HSBC, Lloyds and RBS to provide appropriate compensation where mis-selling occurred.
Saturday June 30: An urgent independent review into the inter-bank lending rate is to be set up by the Government in the wake of the interest rigging scandal.
The review will consider the future operation of the Libor rate and the possibility of introducing criminal sanctions, a Treasury source says.
Mr Diamond is summoned to appear before the Treasury Select Committee next Wednesday.
Sunday July 1: Barclays Bank chairman Marcus Agius is reported to be on the brink of stepping down.
The development comes as Business Secretary Vince Cable backs calls for a criminal investigation into bankers involved in the affair.
Monday July 2: Mr Agius resigns.
Tuesday July 3: Mr Diamond announces he is stepping down with immediate effect.