Documents published today by the Financial Services Authority (FSA) show that the regulator warned Barclays that Bob Diamond could be unsuitable to be appointed as chief executive of Barclays.
The letters say that the ongoing investigation into LIBOR rate rigging could undermine his position and that it would only agree if the Libor investigations had no “adverse effect.”
The letters were published by the Commons’ Treasury Committee which has received evidence from the Bank of England, the FSA and Barclays over the Libor interbank lending rate scandal.
In one of the letters the FSA warns that though it could not prejudge Mr Diamond’s appointment but it may “reassess his suitability.”
A file note from September 15th 2010 records a meeting between Hector Sants, head of the FSA and Barclays chairman at the time Marcus Agius. At the meeting Mr Sants told Mr Agius that the outcome could have a bearing on Barclays decision to appoint Mr Diamond for the role.
In it Mr Sants writes: “The FSA was fully aware that the ongoing 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 prejudge its outcome.
“I specifically made clear that we reserved the right to re-assess his [Mr Diamond] suitability in the light of the conclusions reached by this investigation and requested he make this clear to Mr Diamond.
“Secondly, I would like to record that in that conversation, I made clear that our concerns about Barclays’ culture were not some generic observation but specific to Barclays, and asked that these concerns be communicated by Mr Agius to Mr Diamond. Mr Agius confirmed that he would do this.”
However, by then Barclays had already appointed Mr Diamond as chief executive.
Mr Agius is on record as saying at the meeting that Mr Sants did not cast any doubts on Mr Diamond’s suitability for the post.
In a reply to Mr Sants from Andrew Tyrie MP, head of the Treasury Select Committee, Mr Tyrie says that concerns the FSA had that the culture problems at Barclays were “specific” was “at variance with the impression we received from Mr Agius”.
Mr Diamond had to resign as chief executive of Barclays after the bank was fined £290 million by US and UK regulators for manipulating Libor, the interbank lending rate.
The fine did not lead directly to Mr Diamond leaving his post, but the political ramifications led to senior officials at the regulator warning Barclays that Mr Diamond was not the right person to help restore trust in Barclays and the wider banking sector.