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Barclays plc (LSE:BARC) Chief Executive Officer Bob Diamond is now facing mounting pressures from shareholders and authorities following the LIBOR rate manipulation scandal that caused the British bank to pay £290 million in penalties and hurt its market value in London trading today.
Strong statements were heard from British Prime Minister David Cameron and Chancellor of the Exchequer George Osborne over the latest scandal that rocked the UK banking industry, gunning the shares of several British banks down on the London Stock Exchange.
Describing the situation as an “extremely serious scandal”, PM Cameron threw questions as to how the rigging of the London Interbank Offer Rate happened and who were responsible and accountable for them.
Chancellor Osborne was reported to have stated the possibility of CEO Diamond’s resignation given the “very high expectation” accorded to him, who headed the unit where the manipulations took place.
On 27th June 2012, the U.S. Commodity Futures Trading Commission (CTFC) declared three Barclays entities have “attempted to manipulate and made false reports concerning two global benchmark interest rates, LIBOR and Euribor, on numerous occasions and sometimes on a daily basis over a four-year period, commencing as early as 2005.”
Domino Effect
Shares of Barclays dipped to as low as £1.6075 a share, losing about 18% on the London Stock Exchange following highly publicised statements from various stakeholders, with several British banks also hurt by the turn of events.
Lloyds Banking Group (LSE:LLOY) was down by 3.9%, HSBC (LSE:HSBA) slipped 2.6%, and The Royal Bank of Scotland (LSE:RBS) lost 11.4%, with more than 370 million stocks traded in total amongst these three banks, who are also reported to be under investigation for the same offence.
Chancellor Osborne was quoted to have said that Barclays and other banks “had been in ‘flagrant breach’ of their duties by allowing traders to distort basic data”, calling the scandal a “shocking indictment of the culture at banks like Barclays”.
Bloodthirst
In the official statement released by Barclays, CEO Diamond apologised for the bank’s actions, “which fell well short of the standards to which Barclays aspires in the conduct of its business”, and announced he, along with three other senior managers including Finance Director Chris Lucas, would not take his bonus this year.
But The Telegraph report said one major shareholder stated the decision to decline pay is insufficient and that a resignation in necessary.
“Taking off a couple of million from Bob’s bonus isn’t enough. People should be considering resignations. This has happened under the board’s nose. Where is the accountability?”, the unnamed shareholder was quoted saying.
Labour MP Ed Milliband, speaking to the group Unite, stressed the magnanimity of the actions of Barclays.
“This cannot be about a slap on the wrist. When ordinary people break the law, they face charges, prosecution and punishment. The same should happen here. The public who are paying the price for bankers’ irresponsibility will expect nothing less.”
Barclays is the first major banking institution to have settled with authorities regarding the fixing of rates in LIBOR and Euribor, which was discovered through emails between the bank’s trader and submitter.
More than 220 million Barclays shares swapped hands before London closed in an active reaction by the market on the events surrounding the scandal.
Company Spotlight
Barclays plc is a major universal bank operating in more than 50 countries, employing over 140,000 personnel, offering personal banking, corporate banking, investment banking, and wealth and investment management.
Established more than 300 years ago, the UK-born bank is part of the FTSE 100 of the London Stock Exchange.
