Bob Diamond resigned as chief executive of Barclays this week, after a turbulent two-year reign at the top. His position had become untenable following revelations about the banking giant’s efforts to manipulate inter-bank lending rates.
Diamond was once described as the “unacceptable face” of the business by a leading British politician. He was also a supremely capable businessman – a man who could afford to insist that Barclays would neither ask for nor require a bailout from the government, as many of its one-time rivals were forced to do.
But Barclays’ apparent stability was achieved in part by selling off stock to big institutional investors. This helped to boost the share price, and consequently Diamond’s record-breaking salary and bonuses package. If big banking bosses are asked to work within an environment where short-term decisions yield huge personal profit, can such developments be any surprise?
Barclays sought to make money by manipulating reports of interest rates. At stake, at first, was profit – this sort of collusion could ensure fatter returns for hungry bankers and hungrier shareholders. But then the requirement shifted – from making money to safeguarding reputations. If the actual cost of Barclays’ borrowing was known to the market, then the truth of its less than robust financial health would emerge. And that would spell trouble for the top brass.
The indiscretion has already cost the bank almost £300m in fines, as well as the jobs of the chairman, and now the chief executive as well as the COO. And it may not be over yet with the US Department of Justice and the Serious Fraud Office in the UK continuing their investigations.
But what of the highly-paid CEOs at other banks implicated in the rate-setting scandal? Does the fall of Diamond mean their names are next on the list? I suspect not.
Perhaps, once again, the underlying problem is a system of increasingly lax regulation, which means the extent of individuals’ greed is the only real limit to how far they are willing to go in the name of profit.
Diamond was defiant when he appeared before a British parliamentary select committee last year – suggesting to members of parliament that the time for bankers to show remorse over the 2008 collapse was over. These words seem even more misguided now. The anger over this latest controversy could prove much harder to overcome.