Do sparks fly when you drill a Diamond? It’s a question bankers and politicians were keen to answer as Bob Diamond, Barclays’ former chief executive, appeared before Parliament’s Treasury Select Committee on July 4. The hearing came just one day after Diamond resigned from his position amid the fallout of the ongoing Libor rate-fixing scandal. During today’s three-hour grilling, committee members questioned his competence, suggested he forgo any expected bonuses and payouts and took swipes at his integrity. Perhaps owing to a wooden demeanor, Diamond appeared to keep his cool—even as the line of questioning grew more fiery as the day progressed.
At times he sounded more like the star of a Barclays infomercial than an embattled businessman. He frequently turned the hearing—which coincides with what would have been his 16th anniversary working with the firm—into a sugary tribute to his former employer. “I love Barclays,” he said in his opening remarks. “I love Barclays because of the people. It’s been 16 years of tremendous enjoyment. I worry the world looks at Barclays through a few group of traders who had reprehensible behavior….That’s not representative of the Barclays I know.”
But the Barclays the world has come to know in recent weeks is one where bankers manipulated the London Inter Bank Offering Rate (Libor) — to which many adjustable mortgages and other consumer rates are pegged — in order to boost profits at the bank. According to the Financial Services Authority, which has previously investigated the matter, those actions took place as early as 2005 and carried on through 2007, with scattered occurrences in 2008 and 2009.
Ahead of today’s hearing, Diamond threw kerosene onto the fire. He released an account of an October 2008 phone call with Paul Tucker, the deputy governor of the Bank of England, in which the two discussed the rate-fixing at the center of the scandal. According to Diamond’s account, Tucker “stated that the levels of calls he was receiving from Whitehall were ‘senior’ and that while he was certain we did not need advice, that it did not always need to be the case that we appeared as high as we have recently.” Pundits have subsequently speculated that this may suggest a degree of collusion with senior officials in Whitehall or the last Labour government, and with the Bank of England itself. Emilios Avgouleas, a professor at the University of Edinburgh School of Law,told TIME ahead of the hearing that this was the most vital issue to clarify. “The first and the last question should be what did he really discuss with Paul Tucker,” he says. “What was he told? And what evidence is there that he cleared his actions with the regulator?”
But during the hearing Diamond made it clear that he did not receive any explicit instructions to fiddle with Libor. He claims that the exchange with Tucker led him to believe that “officials in government” were worried Barclays could not fund itself on the market, and that this might lead to threats of nationalizing the bank. According to Diamond, that led Jerry del Missier, Barclays’ chief operating officer at the time, to misunderstand a subsequent conversation with him. Diamond believes that led del Missier to assume that there had been an “instruction passed down from the Bank of England not to keep Libors so high.” “I was not aware that Jerry had a miscommunication or a misunderstanding,” Diamond said. “Jerry didn’t say that to me.”
Politicians are keen to score their own points. Tories see the scandal—which unfolded under Labour’s watch—as a way to discredit them. MPs on the Treasury Select Committee, who knew the hearing would be broadcast on the BBC News Channel and streamed over the Internet, probably sensed an opportunity to build their personal street cred by stomping over an increasingly-hated banker.
They didn’t hold back. Some called into question Diamond’s competence as a manager, and the extent to which he actually understood procedures at the firm. Andrea Leadsom, a Conservative MP from South Northamptonshire, quizzed him on his knowledge of processes at the bank, and the steps senior managers who learned of wrongdoing should have taken. “What was the procedure? The actual procedure,” she asked, trying her best to be harsh, but coming off as slightly melodramatic. “Can you point to it in the Barclays compliance manual?” Diamond simply said he didn’t have the manual in front of him. Later, Andrew Tyrie, another Conservative MP and the chair of the committee, had a dig too. “Nobody was watching the compliance desk,” he said. “Not even the compliance officer.”
Diamond maintain that he only learned the full extent of the scandal “this month.” But Avgouleas, the professor at the University of Edinburgh School of Law, doubts that a chief executive or his key directors would be unaware of Libor manipulation at their own bank. “I’m sure this could be the case with trade derivatives, with CDOs, with complex and structured financial instruments, and with very exotic derivatives,” he says. “But Libor is a very straightforward exercise. If they didn’t know, they have no business to be directors of a bank.”
After the hearing, committee members suggested Diamond was either complicit in the bank’s rate-fixing or rankly incompetent. Speaking to the BBC after the hearing, Conservative MP David Ruffley suggested other examples of misconduct could soon emerge. “He seems to be completely oblivious between 2005 and 2009 to illegality—fiddling Libor,” he said. “It poses a further question: If he was unaware of wrongdoing for four years in his bank on something as important as interest rates, heavens knows what else was going on in other parts of the bank.”
That’s precisely why he and other parliamentarians believe Prime Minister David Cameron is right to have announced a parliamentary inquiry into the banking sector as a result of the furor. But Ed Miliband, leader of the Labour Party, wants to go a step further. He’s calling for a full, judge-led inquiry into the “culture, governance and professional integrity of the banking and financial services industry.” Miliband believes a full-scale investigation is justified given the scale of public anger.
The House of Commons is set to vote on the matter Thursday. Given the blood thirst in Parliament, the heads that have rolled may only be the beginning.