Bob Diamond’s resignation: the late exchanges that led to his demise
Once the former Barclays chief executive realised he was the biggest problem facing the bank, it was time to go
On Monday afternoon Bob Diamond rehearsed for his planned appearance before the Commons Treasury select committee. As his public relations team ran him through question after question that the MPs were likely to fire at him, the American born banker saw that he – and his brash personality – was the main problem facing Barclays bank.
Diamond, 16 years at the bank, but only 18 months into his dream job as chief executive, spoke to a few close colleagues before setting off for home, knowing that David Cameron had used the revelations about Barclays’ attempts to manipulate the London interbank offered rate (Libor) to call an inquiry into the wider banking industry.
Though regulators admit that Barclays is only one of up to 20 banks caught up in the scandal, Diamond epitomised it.
Diamond rang Barclays chairman Marcus Agius and told him it was time for him to go. It was a stunning change in stance from the defiant email to staff he had sent a few hours earlier, telling them he “loved Barclays” and was committed to putting right the wrongs exposed by regulators.
Behind the scenes bigger forces were at work. The regulators had watched the political temperature rising during the day and the Bank of England governor, Sir Mervyn King, and Lord Turner of the Financial Services Authority secretly met Agius, who had himself resigned only hours before, in the late afternoon.
King would not comment but Turner said: “There were major challenges for Barclays in making sure they could convince people there had been a fundamental cultural change and we simply communicated to the board that these were issues they needed to think about. It was for them to agree whether they could achieve that degree of change under the current leadership.”
Agius was hastily reinstated, into a bigger job looking after the company until a new chief executive is appointed. He refused to comment, but it is clear that the words exchanged between the three top men were key. Diamond’s days were numbered.
Damaging emails published by regulators had shown traders promising to fix Libor at certain levels – so the bank could make extra profit – with quips such as “this one’s for you big boy” and references to bottles of Bollinger champagne proving impossible to justify. Then there was the confusion about whether, during the 2008 banking crisis, the bank had deliberately manipulated down the price of Libor in attempt to demonstrate to the outside world that it was not, in the words of one of the emails, “in the shit”. Documents published ahead of the select committee hearing show Diamond’s emailed note of his 29 October 2008 conversation with Paul Tucker, a deputy governor of the Bank of England. Addressed to the then-Barclays chief executive John Varley, and copied to Diamond’s close lieutenant Jerry del Missier, it will be scrutinised by MPs. Del Missier used it as the basis to tell Barclays staff to reduce their Libor quotes. Del Missier, who was investigated by the FSA and cleared, also quit on Tuesday – a month after he was appointed the bank’s chief operating officer. At the select committee Diamond is expected to say that he did not believe Tucker told him to cut Barclays’ rates.
During an emergency board meeting on Monday night the bank’s non-executive directors had to take some quick decisions. The board had intended the departure of Agius to take the heat off Diamond before his appearance at the select committee and give the board some breathing space to ensure there was a possible successor lined up to replace Diamond once the dust had settled. The plan backfired spectacularly. Agius, in a hastily convened conference call, said: “What I hoped to do was lower the temperature surrounding the bank but it became evident as Monday went on if anything the temperature rose.”
Within minutes of the announcement hitting the stock exchange on Monday, Labour leader Ed Miliband was on the sofa of ITV Daybreak calling for Diamond to go. Liberal Democrat peer Lord Oakeshott, never short of a scathing quote, particularly about Barclays, was quick to describe the departure of Agius as the equivalent of kicking out the passenger rather than the driver. “The board is so hopeless they’ve just shot the head of the firing squad and missed the prisoner,” Oakeshott said.
The government, under pressure to launch a fully-blown Leveson-style inquiry, used it as a moment to set Andrew Tyrie, chairman of the Treasury committee, the extra task of chairing a joint committee of MPs and Lords to investigate the banking industry.
When Diamond’s resignation was announced at 7.30am on Tuesday – 30 minutes after the usual time for such announcements, the hastiness of the decision was evident. Agius had called the chancellor, George Osborne, in the early hours to tell him Diamond was going while he was taking over as full-time chairman to find a new chief executive. Osborne, in a Today programme interview shortly afterwards, said: “I think and I hope that it is the first step towards a new culture of responsibility in British banking.”
In a statement Diamond praised “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”. But the reality is that the business he joined in 1997, and transformed into a powerhouse in investment banking on the world stage, is poised to undergo as radical an upheaval as the one he led in the go-go years before the 2008 banking crisis.
One of nine children, Robert E Diamond – known internally as RED – grew up in Concord, Massachusetts. His parents were teachers, a career path he had intended to follow by starting out as a lecturer in management and organisation at the University of Connecticut. After four years, in 1980, he ended up at Morgan Stanley, following a businessman who had mentored him, moving to Credit Suisse First Boston a decade later before arriving at Barclays in 1996.
A sports fanatic – when he ran BarCap his glass cube office was full of sports memorabilia – he adopted Chelsea as his “soccer” team, becoming a regular visitor to their dressing room and presenter of trophies when the club won the premier league, sponsored by Barclays. He loves Boston Red Sox and American football team Patriots, and while his children – now adults – were young ran the little league football in Hyde Park, London.
A keen skier and regular golfer and tennis player, he put his drive and energy into building BarCap into a major league player. It was he who boarded a flight to the US in mid-September 2008 with his close lieutenants to try to buy Lehman Brothers in the hours before it collapsed. While the collapse unleashed a wave of fear across global markets, it led to a massive opportunity for Diamond to buy just the Wall Street business and relocate back to his native America where his children were now studying after their early years at the American school in St John’s Wood.
The BarCap culture – inside a bank whose roots have Quaker origins – always jarred with the staid high street banking business, but even in City cultures was regarded as a testosterone-charged, alpha-male environment – surprising perhaps for a man who in the past has used his fortune to sponsor a chair of women’s studies at Colby College in Maine.
The current controversy over Libor rates is the toughest reputation hit BarCap has had to take. But it is by no means the first. Lord Mandelson once described Diamond as the “unacceptable face” of banking. There were also the four traders who celebrated with a lavish £44,000 dinner at Petrus, Gordon Ramsay’s restaurant; and the legal action against the Guardian to try to suppress details of tax avoidance schemes run by Barclays. Whistleblowers told the Guardian about poker games, a “cow eating club” and sackings inside the structured capital markets business inside BarCap.
More recently, there was the high profile decision to shut down two tax avoidance schemes submitted to HM Revenue & Customs by the bank, even before the bank revealed it had paid a £5.7m tax bill incurred by Diamond when he was relocated back from New York to London to become chief executive in January 2011.
In his years at the bank Diamond transformed Barclays’ disastrous investment bank BZW into a reborn Barclays Capital (BarCap) and rejuvenated the fund manager Barclays Global Investors (BGI), sold off during the banking crisis to bolster the bank’s coffers.
John-Paul Crutchley, banks analyst at UBS, said: “It is fair to say that there is no one individual who has imposed more of their vision, personality and character on a UK bank over the last decade than Bob Diamond at Barclays. From the creation of BarCap in 1997 to the acquisition of Lehman’s US business and the sale of BGI – all were driven by Bob Diamond.”
With banks analysts and shareholders now questioning the over-reliance of Barclays on investment banking, Agius was careful yesterday not to say that Diamond’s departure – or that of del Missier – would mark the dismantling of an investment banking empire which began with “humble beginnings” in 1997.
An exhausted Agius instead paid tribute to Diamond, saying he had “invigorated and focused the whole organisation” in his 18 months as chief executive. “We will miss his energy and vision,” said Agius.