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treasury select committee: libor hearings July 10, 2012

Posted by Bradley in : financial regulation , trackback

The Committee published letters between the FSA and Barclays which have been the subject of discussion during Marcus Agius and the Committee today. Adair Turner expressed the FSA’s displeasure in April 2012 with Barclays’ behaviour. He wrote:

it is of course acceptable for a bank to argue for a favourable approach on any one specific issue, even if the regulator does not immediately agree. But the cumulative effect of the examples set out above has been to leave us with an impression that Barclays has a tendency continually to seek advantage from complex structures or favourable regulatory interpretations. These concerns are sufficiently great that I felt it was appropriate to communicate them directly to you, and to urge you and the Board to encourage a tone of full co-operation and transparency between all levels of your Executive and the FSA.

When questioned about this, Agius says that the job of a regulated firm is to act absolutely within the regulations but that they also operate within an extraordinarily competitive international industry and, within the constraints of regulation and law, their job is to do the best they can for their stakeholders. Earlier he commented that when a bank deals with its regulator it isn’t like dealing with a speed cop about driving over 30 mph in a 30 mph zone – it’s more complex than that.

The Committee spent a lot of time on the question whether Diamond misled them last week – before these letters were made available – about how the FSA characterized Barclays’ attitude to regulatory compliance in early 2012. The Committee focuses on Turner’s letter as representing the FSA’s attitude and Agius tries to argue that Diamond had been referring to Andrew Bailey’s earlier visit to the Barclays Board. Given the wording of the April 12th letter it’s difficult to understand how Agius thinks he can succeed in soft pedaling what was going on. In response to a characterization of the April 12th letter as “damning”, Agius says it is a “firm” letter from a regulator.

Members of the committee expressed surprise that Barclays does not record Board meetings (an intriguing idea for corporate governance reform, but surely unlikely to be adopted), and about the number of things Agius claimed not to know about. At one point he reminded the committee of the limited role of a Board. He resisted attempts to get him to express views on what Diamond was doing last week, or at various points during his tenure at Barclays.

For “a formidable financier with an eye for detail” I did not find Agius’ performance to be impressive. On the other hand he did spend quite a bit of time in the hot seat without saying very much (apart from the fact that King sought Diamond’s resignation and about how much Diamond will take when he walks away) and perhaps that was the point. But he didn’t give a very good impression of the state of UK banking.

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