Newspaper article International Herald Tribune

Testimony of Ex-Chief at Barclays Challenged ; U.K. Panel Investigating Rate Manipulation Also Finds Regulatory Lapses

Newspaper article International Herald Tribune

Testimony of Ex-Chief at Barclays Challenged ; U.K. Panel Investigating Rate Manipulation Also Finds Regulatory Lapses

Article excerpt

A parliamentary panel investigating interest-rate manipulation also cited failures by regulators.

British politicians have said in a report that the former chief of Barclays, Robert E. Diamond Jr., has not provided lawmakers with a full account of the actions inside the bank during recent hearings into the rigging of interest rates.

The report from Parliament's Treasury Select Committee, released Saturday, also highlighted failures by regulators, including the British Financial Services Authority, to address the manipulation of the London interbank offered rate, or Libor, one of the world's most important benchmark interest rates.

"The evidence suggests that the Bank of England was aware of the incentive for banks to behave dishonestly, yet did not think that dishonesty was occurring. Nor did it appear to have asked the F.S.A. to check to see if such dishonesty was occurring," the report said. "With hindsight this suggests a naivete on the part of the Bank of England. They were certainly relatively inactive. "

Concerns that firms were altering their Libor submissions were first brought to the attention of the authorities in late 2007, according to regulatory filings. But British officials joined their U.S. counterparts in investigating the abuses only in early 2010.

Adair Turner, chairman of the Financial Services Authority, told British lawmakers last month that regulators had not perceived Libor to be a major area of risk during the recent financial crisis.

"The manipulation was spotted neither by the F.S.A. nor the Bank of England at the time," said Andrew Tyrie, who heads the select committee. "That doesn't look good."

The British government is reviewing how Libor will be set in the future. The inquiry may lead to greater regulatory oversight of the rate, while lawmakers are considering new legislation that would make the manipulation of benchmark rates a criminal offense.

The report called for broad changes to banking regulation, including greater prosecution powers by the authorities against offenders.

The report challenges some of Mr. Diamond's assertions about the bank's relationship with regulators. It also questioned the top leadership at the bank and the candor of Mr. Diamond's testimony.

"Mr. Diamond's evidence, at times highly selective, fell well short of the standard that Parliament expects," Mr. Tyrie said in a separate statement.

Documents released by the local authorities show that officials had questioned the culture at the top of the British bank as far back as 2010, though Mr. Diamond had said regulators were happy with the firm's leadership.

The doubts about Mr. Diamond's testimony come after several senior executives at Barclays, including Mr. Diamond and the bank's chairman, resigned last month. The firm agreed to a $450 million settlement with the U.S. …

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