19.09.2012
By Simon Miller
The Financial Services Authority (FSA) warned Barclays that would revoke Bob Diamond's appointment as the bank's chief executive if the investigation into Libor proved to have an "adverse effect" a memo released by the Treasury Select Committee reveals today.
FSA's former chief executive Hector Sants sent the memo to the committee in rejection of its finding that the Libor investigation was not considered by the FSA at the time of appointing Diamond as Barclays' CEO.
In the accompanying letter, Sants told committee chairman Andrew Tyrie: "The FSA was fully aware that the on-going investigation might come to conclusions which would be relevant to Mr Diamond's suitability. However, at the time, since the investigation was not concluded it would not have been appropriate to pre-judge its outcome."
The minutes of a meeting with Marcus Agius said that Sants fully briefed the former Barclays chairman on an issue that "is not contained within the letter and was not verbally relayed to BD [Bob Diamond]".
The minutes added: "HS [Hector Sants] explained that in reaching a judgement on this appointment the FSA has taken into consideration an ongoing investigation with regard to Libor that involved both the FSA and CFTC. Therefore, agreeing to BD's appointment at this time was on the basis that the current view of the investigation does not have an adverse effect."
It added: "However, HS stressed that this is an ongoing investigation and the FSA's position could change so the board should be aware."
The minutes will cast doubt on Agius' evidence to the select committee where he was thanked for his candor.
In response to Sants, Tyrie noted the discrepancy of Agius's evidence and thanked Sants for drawing the committee's attention to the evidence.
The former Barclays chairman told the committee: "These matters [the actions of traders in manipulating Libor submissions and the actions of Barclays in making lower Libor submissions during the crisis] were not raised by the FSA at that time [September 2012] as casting doubt on his suitability as CEO."
The minutes of a meeting with former Barclays chairman also noted that Sants stated the FSA's historical concerns regarding Barclays risk appetite and control framework. He acknowledged the progress made by Diamond's predecessor John Varley and the work underway addressing the FSA concerns.
The memo added: "However, at the time of the FSA's concerns, BD [Bod Diamond] was managing the area within the group where concerns were foremost, therefore it is importance that in his new role as CEO he ensure the continued progress of initiatives the group has commenced."
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