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Barclays’ (LSE:BARC) Chief Executive Officer Bob Diamond finally gave in and tendered his resignation with immediate effect a day before a parliamentary inquiry probes into the interest rate manipulation scandal the bank was accused of last week.
Calls for his resignation were heard from the top officials of the British Government, including the Prime Minister and the Chancellor of the Exchequer, after Barclays was ordered to pay penalties of £290 million for manipulating the London Interbank Offer Rate (LIBOR) and Euribor for four years since 2005.
Diamond headed Barclays’ investment arm, where the rate manipulation took place and was discovered through a number of email correspondences between the bank’s trader and submitter.
His resignation, according to Mr. Diamond, was meant to save Barclays’ reputation hurt by the events last week.
Barclays was also implicated by UK’s Financial Service Authority over mis-selling of hedging products to small and medium sized businesses.
“The external pressure placed on Barclays has reached a level that risks damaging the franchise – I cannot let that happen,” Mr. Diamond stated in the announcement of his resignation.
“No decision over that period was as hard as the one that I make now to stand down as Chief Executive.”
The Right Decision
Diamond’s decision to quit his post drew the attention of politicians, investors, and analysts in the City and the halls of Westminster, in light of the now ex-CEO of Barclays’ statement of non resignation days after the scandal broke out.
Chancellor Osborne, in an interview with the BBC Radio, said it was the “right decision” for Barclays.
“I think it’s the right decision for the country because we need Barclays focused on lending to our economy, not distracted by this argument of who should be in charge.”
“I think Bob Diamond’s resignation is a first step towards that change of culture, that new age of responsibility we need to see.”
Labour pary leader Ed Milliband echoed the same sentiment saying the decision was “necessary and right”.
Milliband said Bob Diamond was not “the man” to lead the change that Barclays needed, and further saying the troubles that beset the bank is a microcosm of the “culture and practices of the entire banking system”.
A parliamentary inquiry announced by British Prime Minister David Cameron starts tomorrow, with Diamond taking the stand followed by Barclays Chairman Marcus Agius on Thursday.
“I look forward to fulfilling my obligation to contribute to the Treasury Committee’s enquiries related to the settlements that Barclays announced last week without my leadership in question,” Mr. Diamond said.
Chairman Comments
Chairman Marcus Agius, who also tendered his resignation on Monday, highlighted Mr. Diamonds “enormous contribution” to Barclays in the 16 years the ex-CEO was part of the bank.
Mr. Aguis stated Mr. Diamond helped build Barclays investment bank into “one of the leading global investment banks in the world” as well as leading the bank “superbly” as Chief Executive.
In lieu of a new Chief Executive, Mr. Agius will become a full time Executive Chairman to be assisted by Sir Michael Rake as its Deputy Chairman, until a successor is chosen from both internal and external candidates.
Shares of Barclays went up 3.5% to £1.74 by 12:00 GMT, reflecting positive investors’ reaction over Mr. Diamond’s decision to stand down.
