There is a growing banking scandal unfolding in the UK. Instead of bailing them out all the time shouldn’t we explore putting a few of them in the slammer:
Barclays chief executive Bob Diamond suddenly quit on Tuesday over an interest rate-rigging scandal that threatens to drag in a dozen more major lenders, but suggested the Bank of England had encouraged his bank to manipulate the figures.
“The external pressure placed on Barclays has reached a level that risks damaging the franchise – I cannot let that happen,” said Diamond, 60. The terms of his severance were not announced, though Sky News said the bank would ask Diamond to forfeit almost £20 million ($39 million) in bonuses.
Politicians and newspapers have zeroed in on the scandal – which revealed macho emails of bankers congratulating each other with offers of champagne for helping to fiddle figures – as an example of a rampant culture of wrongdoing in an industry that stayed afloat with huge taxpayer bailouts.
Barclays released an internal 2008 memo from Diamond, then head of its investment bank, suggesting that the deputy governor of the Bank of England, Paul Tucker, had given Barclays implicit encouragement to massage the interest figures lower during the peak of the financial crisis in order to present a better picture of the bank’s financial position.
According to the memo, Tucker told Diamond he had received calls from senior government officials. “It did not always need to be the case that we appeared as high as we have recently,” Diamond said he had been told.
The Bank of England declined to comment, but analyst Ian Gordon at Investec said: “Based on first inspection it does seem to suggest that Barclays have received a message from the Bank of England which provided, to put it mildly, significant encouragement.
“So they’re maybe trying to share the blame but with justification. It raises a whole bunch of questions, and they’re very serious and they’re for the Bank of England to answer.”