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Tuesday, July 03, 2012

Barclays Dishes The Dirt and Publishes Document



Barclays have published a document ahead of tomorrow's appearance by Bob Diamond at the Treasury Select Committee.

Here are a few highlights of the full document which can be viewed here:

"Supplementary information regarding Barclays settlement with the Authorities in respect of their investigations into the submission of various interbank offered rates

Context

In anticipation of Bob Diamond’s appearance before the Treasury Committee tomorrow, 4 July, 2012, in the interest of clarity and transparency we set out on behalf of Barclays a brief summary of the salient events and the actions that Barclays has undertaken since becoming aware of them. These explanations are in no way intended to excuse any of the events that occurred. These events should never have taken place, and Barclays deeply regrets that they did....

The investigation
The bank has conducted an exhaustive internal investigation over more than three years supported by external counsel. The bank has reviewed 22 million documents from over 200 custodians, over 1 million audio files and conducted more than 75 interviews. The results of the reviews were shared with the Authorities, who in turn made their own requests for documents and interviews.

In total, the bank has invested nearly £100m to ensure that no stone has been left unturned. The bank’s exceptional level of cooperation was expressly recorded by each of the Authorities, and was described by the DoJ as “extraordinary and extensive, in terms of the quality and types of information provided” and ”the nature and value of Barclays cooperation has exceeded what other entities have provided in the course of this investigation.”

That cooperation has led to Barclays being the first to reach resolution of these issues. It ironic that there has been such an intense focus on Barclays alone, caused by our being first to settle in the midst of an industry-wide, global investigation.....

29 October 2008 Communication from Bank of England
During October 2008, in the wake of the collapse of Lehman Brothers, when liquidity conditions had tightened acutely, Barclays raised its US Dollar LIBOR submissions more significantly than other panel members. In the month of October 2008, in particular, Barclays US Dollar LIBOR submissions for the 3 month maturity were the highest or next highest of the panel on every single day of the month and therefore excluded from the calculation of LIBOR.

Barclays did not understand why other banks were consistently posting lower submissions; Barclays firmly believed that the other panel members were not, in fact, funding at a lower cost than Barclays, and we were disappointed that no effective action was taken, notwithstanding our having raised these issues with various Authorities during the whole financial crisis period as outlined in the attached timeline.


As one would expect, Barclays (including Bob Diamond and Jerry del Missier) was in close contact with the Bank of England and other Authorities about the liquidity crisis generally.

On 29 October 2008, Bob Diamond received a call from Paul Tucker, the Deputy Governor of the Bank of England. The substance of that call was captured by Bob Diamond via a note prepared at the time. A copy of that note is appended to this document; it was circulated to John Varley, then Barclays Chief Executive, and Jerry del Missier, then President of Barclays Capital.


Subsequent to the call, Bob Diamond relayed the contents of the conversation to Jerry del Missier. Bob Diamond did not believe he received an instruction from Paul Tucker or that he gave an instruction to Jerry del Missier. However Jerry del Missier concluded that an instruction had been passed down from the Bank of England not to keep LIBORs so high and he therefore passed down a direction to that effect to the submitters.


There was no allegation by the Authorities that this instruction was intended to manipulate the ultimate rate. The bank’s submissions had consistently been excluded from the LIBOR calculation. Moreover the instruction became redundant in a matter of days as market conditions improved.


The FSA investigated Jerry del Missier personally in relation to these events and closed the investigation without taking any enforcement action.


Chronology of key issues
A. 2005 to 2009 – Trader requests


.....During this period, Barclays was consistently raising concerns with the BBA, questioning why other banks’ LIBOR submissions appeared to be so high compared to those of Barclays. Many of these concerns were based upon Barclays observations that other banks were making submissions which were lower than levels at which they appeared to be undertaking transactions. ......


Barclays also raised concerns with the FSA, the Bank of England and the US Federal Reserve. The documented occasions on which Barclays made such contact are illustrated in the attached document Timeline of regulatory contact..."

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