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Value is no substitute for values: that’s the lesson our bankers have to learn

2012 July 4

The resignation of Bob Diamond was instructive. Lonesome George Osborne, a man whose own future as Chancellor looks increasingly endangered, hailed it as “the first step towards a new culture of responsibility in British banking.”  But the drawn-out process which led to Mr Diamond’s departure as chief executive of Barclays Bank shows just how much change is needed before our banks can regain the public’s trust.

When the news first broke that Barclays staff, including senior managers, had been lying to rig the Libor interbank lending interest rate, there was immediate resistance to the idea that Mr Diamond should go. He and three top managers offered to forgo their bonuses thinking that would assuage public outrage at the fiddling of the rate that affects mortgages, loans and credit-card rates worth trillions.

When they realised that was nowhere near enough the Barclays board decided their chairman, Marcus Agius, should walk the plank. It was not much of a sacrifice since he had been planning to leave his £750,000 pa part-time post next year anyway. But Mr Diamond must stay since his resignation, one big investor said, was not “a move that would create value”.

It was a revealing remark. The focus was not on right, culpability or responsibility, nor even on what were the reputational implications for Barclays. It was not about values, only “value”.

Over the past decade all that has been important in the world of high finance is how much money you made. By that yardstick Bob Diamond was a top performer. The deal he did for Barclays to buy Lehman’s US business when it went bust left his City peers in awe. No wonder the Barclays board was unanimous that their chairman was easier to replace than their chief executive.

So Marcus Agius went, issuing a statement whose language suggested it had been drafted by Mr Diamond rather than the old-school Mr Agius. At his level he would almost certainly have had no knowledge of anything as low-down as dude-trader Libor-fiddling. Mr Diamond, by contrast, was directly responsible at the time for Barclays Capital, the division responsible for the abuse. As a boss with a reputation as a very hands-on manager, he was either incompetent or complicit in a deception designed to calm market jitters about Barclays vulnerability.

Mr Diamond may be a shrewd investment operator but he clearly has lacked understanding that the public wants something more from its bankers. He has shown little sensitivity over the size of the comparatively large pay packages he got for running a bank which has not delivered good shareholder returns. Barclays in his time has been involved in a series of unsavoury tax avoidance schemes, poor reporting standards, inadequate money laundering practices and regulatory failures including the mis-selling of loan insurance. Yet only last year he was whining that the time for “remorse and apology” from banks should surely be over.

It is not just Barclays of course. Around 20 other banks will soon enter the firing line on the Libor scandal. But society’s indignation at our sick banking culture goes far wider than Libor. Once the stone is lifted all kinds of things are found to be crawling underneath – like the fact that Barclay’s head of government policy and finance has raised $927,000 for Mitt Romney in the US presidential race. Banks are private businesses but they are also public servants and such self-serving partiality is not what the public wants.

Bob Diamond continues to fail to understand all this. He has told friends that he has been unfairly “hounded” out of his job after not really doing anything wrong. The fact that he thinks that shows why he could not continue in the post.

The Church Times

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