Diamond drags Bank into rigging row (From Free Press Series)

Diamond drags Bank into rigging row

11:10am Wednesday 4th July 2012 in National News © Press Association 2013

Former Barclays boss Bob Diamond will fight for his reputation in front of MPs as he drags Bank of England and Whitehall officials closer to the heart of the rate-rigging scandal.

After his shock resignation as Barclays chief executive on Tuesday, Mr Diamond released a record of a phone call with BoE deputy governor Paul Tucker that ultimately led to the bank pushing down the key Libor (London inter-bank offered rate) that affects the price of mortgages and loans.

The dramatic disclosure has raised questions over the involvement of the central bank, Whitehall and the last Labour government in the rate-fixing affair that has shaken the banking industry to its core.

Ahead of the Treasury Select Committee hearing, Labour's former City minister Lord Myners said he did not think any of his Treasury colleagues, under the leadership of Alistair Darling, discussed the rate with the Bank of England.

However, MPs on the committee have warned that rate-rigging took place by rogue traders long before the contentious conversation in October 2008 and will demand to know how this was allowed to happen on Mr Diamond's watch.

As the American prepares a rigorous defence of his actions, the details of his exit package are still being thrashed out with reports that he will be asked to hand back nearly £20 million of unvested share awards.

Mr Diamond is expected to "speak more freely" when he gives evidence now he is no longer at the helm, with much focus on the chat between the bank chief and Mr Tucker about Libor rates at the height of the credit crunch in 2008.

In a note sent on October 30, 2008, Mr Diamond told his right-hand man Jerry del Missier and then chief executive John Varley about the call with Mr Tucker.

He said Mr Tucker relayed concerns from "senior Whitehall figures" over why Barclays was always towards the top end of Libor pricings. He is alleged to have added that the bank's Libor rate did not "always" need to appear as high as it had recently.

The Financial Services Authority investigated Mr del Missier personally in relation to these events and closed the investigation without taking any enforcement action, the statement added. However, Mr del Missier followed Mr Diamond out of the door on Tuesday and quit with immediate effect.