Marcus Agius, the chairman of Barclays who joined the board in 2006 after a distinguished career as a banker at Lazard, resigned this morning in what a statement acknowledges as his failure to protect the institution’s reputation after it agreed last week to pay $450 million in a settlement with British and American regulators over its attempts to manipulate interest rates.
But some critics see the move as a diversionary tactic and are calling for the head of the penultimate guardian -- and the person with operational responsibility for the bank –- CEO Bob Diamond. Still others see a much broader ethical breakdown in banking and business.
“Last week’s events have dealt a devastating blow to Barclays’ reputation,” Agius said in a statement. “As chairman, I am the ultimate guardian of the bank’s reputation. Accordingly, the buck stops with me and I must acknowledge responsibility by standing aside.” Agius will remain as chairman until a successor is found.
Michael Rake, a senior independent director of Barclays, has been named deputy chairman. He will lead a review of all Barclays’ practices, issue a report and develop a code of conduct for employees.
“Authorities found that employees in the [Barclays’] treasury department, which helped set Libor, submitted artificially low figures at the request of the firm’s traders, who profited from buying and selling financial products,” report the New York Times’ Mark Scott and Michael J. de la Merced. “The two sides are supposed to be divided by so-called Chinese walls to ensure that confidential information is not improperly shared to make profits.”
What exactly is Libor? It’s the London Interbank Offering Rate that “is determined by about 18 banks’ daily estimates of how much it would cost them to borrow from one another for different time frames and in different currencies,” as Bloomberg’s Howard Mustoe explains. “Because banks’ submissions aren’t based on real trades, the potential exists for the benchmark to be manipulated by traders.”
Agius, 65, joined Lazard in 1972. He previously was chairman of Lazard London and a deputy chairman of the company’s worldwide operations. He is also resigning as chairman of the British Bankers Association, which helps to calculate the interbank borrowing rates.
“If anything, by falling on his own sword, Mr. Agius leaves the board temporarily weakened at a time when a strong leader is required to make tough decisions,” Shore Capital analyst Gary Greenwood says in a piece by the Associated Press. The “bigger issue,” he maintains, is “whether Mr. Diamond should also remain in his role.” Despite Diamond’s operational acumen, Greenwood questions “whether the negative sentiment towards the company, of which he is the focus, can be repaired while he remains at the helm.”
Prominent in the chorus calling for Diamond to resign is Ed Miliband, leader of Britain's opposition Labour Party. “I don’t think he can carry Barclays forward ... because I think that he was there, he was actually in charge of the part of Barclays where some of these scandals took place some years back,” Miliband tells ITV.
In acknowledging last week that the settlement would “damage customer trust in the bank,” Diamond revealed that he and other senior executives would forgo their bonuses this year, Reuters’ Alexandra Alper and Kirstin Ridley reported. Much of the improper trading and manipulation occurred while Diamond, a fixed-income trader who replaced John Varley as CEO in 2011, was president and CEO of Barclays' investment bank.
One certainly gets the feeling that Agius’ beheaded white mane is the tip of a frigid mass that’s finally floating into the shipping lane of media and political watchdogs. British MP Chris Leslie is one of those who is fond of the “iceberg” analogy. So, too, is Scotsman.com. And that’s just the tip of more than 4,500 other chilling news stories. In other words, keeps your eyes peeled for more scandals that may soon break.
“It is in Barclays’ interest to prove the old adage that misery loves company and I expect they’ll be implicating a lot of their colleagues in other banks,” former U.S. Securities and Exchange Commission chairman Harvey Pitt was quoted as saying last week.
And it’s not just the banks that are at risk of exposure.
“What do Barclays, JP Morgan, MF Global and Chesapeake Energy have in common?” Francine McKenna asks in Forbes this morning. She answers: “They are all examples of risk management and audit failures and the auditor of all of them is PricewaterhouseCoopers.”
McKenna posits that the reason “major media” have not yet tied in external auditor PwC “when talking about the Barclays Libor scandal, JP Morgan’s costly “whale” trade, or the woes brought to Chesapeake Energy by its imperial CEO, Aubrey McClendon” –- is because what external auditors actually do is difficult to grasp. But a primary responsibility is to certify “executives are setting the proper ethical and legal compliance tone,” she writes after citing a blog item by Thomas R. Fox in support of a claim that “the ethical culture of banking is in ruins.”
Indeed, the Bloomberg story reveals that at least a dozen firms, including Citigroup, Royal Bank of Scotland Group and UBS “are being probed by regulators worldwide for colluding to rig the rate, the benchmark for more than $360 trillion of securities, including mortgages, student loans and swaps.”
Seems like there’s a whole lot of ’splaining for corporate communicators to do in the months ahead.