| LONDON, July 16
LONDON, July 16 Britain's top bank regulator and
a former executive in the middle of an interest rate scandal at
Barclays face a grilling by British lawmakers on Monday over
what they knew about an affair that has drawn in banks,
regulators and politicians on both sides of the Atlantic.
The House of Commons Treasury Select Committee will question
Jerry del Missier two weeks after he quit as chief operating
officer of Barclays, the British bank hit by an
interest rate manipulation scandal that has blown up into a
political storm. He w as the trusted investment banking
lieutenant of Bob Diamond, the Barclays chief executive who quit
the same day.
Del Missier is said by Barclays to have misinterpreted a
message from Diamond and told the bank's staff that the Bank of
England had sanctioned them submitting lower rates to massage
down the London Interbank Offered Rate, or Libor, the rate that
underpins global transaction worth trillions of dollars.
Del Missier has yet to comment publicly on the matter and
his evidence could shine a light on who knew what at Barclays
after testimony from Diamond which some committee members have
characterised as misleading, a charge Diamond has rejected.
Adair Turner, chairman of the Financial Services Authority
(FSA), will follow del Missier before the committee. He will
face questions on the regulator's involvement and whether it was
tough enough when rate rigging occurred between 2005 and 2009.
Barclays was fined a record $450 million last month by U.S.
and British authorities for manipulating the Libor interest
rate. Barclays will pull out of the rate-setting panel for
interbank lending in the United Arab Emirates because of its
involvement in the Libor scandal in Britain, industry sources
told Reuters on Sunday.
Libor is compiled from estimates by big banks of how much
they believe they have to pay to borrow from each other. It is
used for $550 trillion of interest rate derivatives contracts
and influences rates on mortgages, student loans and credit
cards. An understated estimate could allow a bank to present a
better picture of its financial health.
Questions have arisen over whether supervision of the
benchmark rate was too lax. The Bank of England confirmed on
Friday it had received U.S. recommendations to overhaul Libor,
and had passed them on to the banking trade group responsible
for the rate.
It also emerged that Barclays alerted U.S. regulators as far
back as 2007 to concerns that banks were rigging benchmark
interest rates, and policymakers on both sides of the Atlantic
did not appear to take decisive action.
The British parliamentary committee has questioned Diamond,
Barclays' Chairman Marcus Agius and Paul Tucker, deputy governor
of the Bank of England, in its efforts to uncover what happened
Diamond and del Missier quit on July 3 and Agius said,
during testimony to the committee last Tuesday, that BoE
Governor Mervyn King effectively forced Diamond to go because he
had lost the confidence of regulators.
Turner, one of the favourites to take over from King as BoE
governor next year, is likely to be asked how involved he was in
forcing Diamond out.
He could also be challenged on why the FSA didn't react more
to warnings about Libor, and what was clearly a strained
relationship with Barclays.
The FSA chief sent a scathing letter to Barclays in April
telling the bank that its "aggressive" culture needed to
Barclays is the only bank so far to giving false information
as part of the process of setting Libor.
A conversation in October 2008 between Diamond and Tucker is
at the centre of confusion about whether Barclays was told by
the central bank it could submit lower Libor rates.
In an internal memo written after that conversation, Diamond
said Tucker told him "it did not always need to be the case that
we appeared as high as we have recently".
Diamond has since said he did not take that as an
instruction to submit lower rates, but said del Missier
mistakenly understood the memo as a green light to do so. Del
Missier declined to comment, a spokesman for Barclays said.
When Tucker appeared before the committee he said the memo
misrepresented the conversation. The purpose of the call was to
share his concerns about Barclays' funding costs rather than
discuss interest rates, Tucker said.
Turner, 56, has been head of the FSA since 2008, when he
warned of a more intrusive and direct style of supervision after
the painful lessons from the financial crisis.
He will be joined in front of lawmakers by Andrew Bailey,
the FSA's head of banking supervision, and Tracey McDermott, the
FSA's acting director of enforcement. They are due to appear at
1545 GMT, after del Missier at 1500 GMT.
More than a dozen banks are expected to be drawn into the
Libor scandal, which is being probed by authorities in North
America, Europe and Japan.
Agius and senior Barclays executives told staff the bank's
problems would be "put in perspective" by fines imposed on
rivals, according to a memo sent out on Friday.
Libor rates submitted by banks are compiled by Thomson
Reuters, parent company of Reuters, on behalf of the
British Bankers' Association.