Del Missier appeared first in front of the panel of MPs, which is chaired by Andrew Tyrie. The Committee had pencilled in 45 minutes to question the ex-Barclays COO before taking further evidence from Lord Adair Turner, executive chairman of the FSA, Andrew Bailey, head of the FSA’s prudential business unit, and Tracey McDermott, acting director of enforcement and financial crime, are to be questioned.
Until today, the TSC had spent over seven hours questioning Bob Diamond, former chief executive of Barclays, Marcus Agius, the bank’s chairman, and Paul Tucker, deputy governor of the Bank of England, over the scandal. You can read Financial News’s live-blogs of the previous three hearings by visiting the following links: Diamond [ http://bit.ly/M5PgXD ]; Tucker [ http://bit.ly/LJjJM2 ]; Agius [ http://bit.ly/MXh9Wy ]
This double-bill took another two-and-a-haf hours. Here is how FN live blogged the event:
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16:05 Meeting not yet underway, but as we eagerly await the appearance of Jerry del Missier before the committee in the latest instalment in the Liborgate hearings, it’s proving tough to work out just how long it might be before the parliamentary representatives broach the billion-dollar question of quite how and why the former Barclays chief operating officer did or didn’t come to misunderstand the contents of Bob Diamond’s phone call with Bank of England deputy governor Paul Tucker. Accounting for parliamentary pleasantries, we’re rooting for under two minutes.
By way of reminder, here’s the exchange between Michael Fallon MP and Diamond on his appearance, based on TSC transcripts:
Fallon: What I want to know is, how did Jerry del Missier get this wrong, when you had just been talking to him? How did he not believe it was an instruction, either from the Bank or from the public authorities?
Diamond: Michael, with apologies, I can’t put myself in Jerry’s shoes, with what he said here. The FSA is one of the three regulatory agencies that worked with Barclays for three years. In addition to this report they also did an individual investigation of Jerry, and their conclusion was to clear him: that it was a miscommunication or a misunderstanding.
16:15: Andrew Tyrie gets the questioning underway, and asks Jerry del Missier what he did after he received the note of Bob Diamond’s conversation with Bank of England deputy governor Paul Tucker. Del Missier recounts that Diamond told him of the conversation with the Bank of England that the Bank had been getting “pressure from Whitehall” about Barclays and that “we should get our Libor rates down and we shouldn’t be outliers”.
He says he relayed the note to the head of Barclays’ money markets desk and that they would have been like to “take the views [in the note] into account”. He adds: “Given at that stage Barclays’ was high rates, they would’ve taken this into account which would’ve resulted in lower submissions.”
Del Missier appears to be slightly tense, calls Tyrie “sir” in his responses. Unlike Diamond’s testimony, they aren’t on first name terms here.
16:16: Del Missier says he passed the “instruction as I received it” onto the head of the money markets desk based on the conversation with Diamond, and admits that his request to “take into account” the Bank of England’s views would have resulted in lower Libor submissions by the bank. He adds he did not discuss the issue with Diamond again.
16:23: Conservative MP David Ruffley asks del Missier why he did not “check up” on whether his communication of the Diamond note to his head of money markets had any impact on Barclays’ Libor submissions. He has no concrete answer, and is on the ropes as Ruffley presses the point home. Del Missier, shaking his head and shoulders, talks about the “situation at the time” during the financial crisis.
16:27: Del Missier is not being allowed to duck the issue of whether the US Department of Justice is right in calling the Libor submission lowering “improper”. After a grilling by Ruffley, Tyrie asks whether he acknowledges the behaviour was improper with hindsight. This time, del Missier says he certainly doesn’t want to disagree with the DoJ…
16:30: A potentially explosive comment from del Missier, as he says Diamond told him that Tucker had “given the instruction” to report lower Libor rates.
The former Barclays COO says he acted “on the basis of the phone conversation” he had with Diamond.
16:38: Commentators on Twitter are pointing out that, five days before the Libor settlement, the FSA approved del Missier’s promotion to the role of chief operating officer.
His evidence here could raise concerns over the type of questions asked by the regulator when approving senior banking appointments.
The Wall Street Journal’s Simon Nixon tweets: “Big questions about credibility of FSA investigation and its decision to allow del Missier promotion following del Missier evidence.”
16:40: Under questioning from Michael Fallon, del Missier says he understood the instruction had come from the Bank of England rather than any other source or Diamond, and that he relayed that impression to the money markets head. It emerges he had a “brief conversation” with the latter, who asked the context for the instruction.
Del Missier says he recounted the contents of his discussion with Diamond. When George Mudie MP brings up the fact that Diamond’s testimony was that he did not believe he had received an instruction from Tucker or passed an instruction to del Missier, the latter responds “I can’t speak to what Mr Diamond recalls.” The “I can’t speak to” line has been a regular soundbite in the various hearings…
16:45 Under questioning from colourful Labour MP John Mann, del Missier says he had no knowledge of Libor ‘low-balling’ in 2005, 2006, 2007 and 2008. However, del Missier says he was “aware of all the press surrounding Libor and the speculation about Barclays” in 2008. He adds that he “had conversations oftentimes about the state of the [Libor] markets”.
The WSJ had published a series of articles raising the spectre of Libor manipulation in 2008, sparking regulators’ investigations.
16:57 Predictably, the Treasury Committee’s slot with Del Missier is over-running, so presumably the trio of Financial Services Authority folk that had been due at 16:45, namely chairman Lord Turner, prudential business unit head Andrew Bailey and acting enforcement and financial crime director Tracey McDermott, will be milling around in the corridor.
17:00: Labour MP Pat McFadden asks del Missier of several occasions when Barclays’ managers and Libor submitters discussed manipulating Libor, according to evidence turned up by the FSA investigation. Del Missier says he did not know that these conversations took place.
McFadden turns to the note of Diamond’s phone call with Tucker and asks: “Why is there any significance in this phone call when you’re up to your arms in dishonest activity in the years up to that phone call?”
At first it doesn’t seem entirely clear that del Missier is aware McFadden is talking about a period before the note but he responds with a half apology, saying “I deeply regret what happened”.
Del Missier is reduced to saying: “I don’t know why they would have been surprised or not,” after McFadden persists in questioning as to why there was no pushback from the money markets desk if lowering Libor had not been going on for months already and the Tucker call had been a significant development as billed.
17:07: The FSA cleared del Missier of wrongdoing over Libor manipulation in September 2011. There are surely now going to be questions for the regulator when its senior executives come before the panel.
Incidentally, Lord Turner and his team were supposed to come before the panel at 4:45pm BST.
17:11: Labour MP Andy Love turns to FSA investigation into del Missier, asking: “Did the FSA investigation clear of you any wrongdoing?” Del Missier initially skirts around the word “clear”, saying: ‘I was investigated by the FSA, and they took no action.” He is later pinned down to say “I was cleared”.
Love then asks if del Missier acted as the “fall guy” for Diamond. Del Missier says he is “not the fall guy for anything”.
17:15: Andrea Leadsom MP, who has shown a history of asking about bank processes, asks what percentage of del Missier’s bonus was due to the controls he had put in place at Barclays.
A reminder: Del Missier and Rich Ricci were both understood to be the two bankers to have been paid £6.7m and £6.5m in 2011. In 2010, it was revealed del Missier received a £10.17m bonus on top of a £734,000 salary [ http://www.efinancialnews.com/story/2012-03-09/two-barclays-bankers-6-5m-6-7m-payouts ].
Leadsom presses for the name of the head of the money markets desk at Barclays at the time. Del Missier says it was Mark Dearlove.
Dearlove had also been named in email communications between Barclays and Bank of England officials by the Bank earlier this month. A name for the TSC to chase?
17:17: A welcome move by Andrea Leadsom to pin down the timing of the events on October 29 and 30, 2008. Del Missier says he passed the instruction to the money markets desk on October 29, based on his conversation with Diamond and before the latter wrote his October 30 note outlining the Tucker conversation. Asked if he asked Diamond to write that note, “absolutely not” is the answer.
…and it seems that Leadsom has just uncovered new evidence – Barclays compliance team had been informed of del Missier’s instruction to lower Libor rates based on Diamond conversation.
17:22: One suspects the panel might also be following up an interest in one Stephen Morse, the compliance official del Missier says was informed about the Libor rate instruction.
17:27: And it’s all over for Jerry del Missier. He closes the session by saying he deeply regrets what happened and that the “overwhelming majority” of employees in the bank are ethical – very similar to the responses given by Diamond in his evidence session earlier this month. The committee will now break before taking evidence from the FSA’s Lord Turner and his team.
• It’s now the turn of the FSA’s trio…
17:40: FSA director Andrew Bailey, head of the prudential business unit, tells the TSC that after meeting with the Barclays board, he came out feeling the UK bank “had a culture of gaming, and gaming us”.
17:45: Turning to the issue of Barclays thinking the FSA was happy with the “tone at the top”, Tyrie asks if Barclays could have mistaken the severe message the FSA staff say they were communicating to the bank. Bailey says: “This is the only time in 15 months [of me having such meetings] that it was followed up with a letter and a meeting between the chairman and [FSA chairman] Lord Turner”.
17:50: Answering questions on his meeting with Marcus Agius over concerns about the culture at Barclays and its relationship with the FSA, Lord Turner says the situation deteriorated to a point where there needed to be a “chairman to chairman” meeting. He says: “We were beginning to think there was a cultural tendency to be always on one side, always to be pushing the limits”.
Lord Turner says that the letter he sent to Barclays as a record of the meeting between himself and Marcus Agius, which was last week described by MPs as “damning”, was the only one of this kind he has had to send during his time at the FSA.
18:04: The committee wants to know why the CFTC could get it right in terms of spotting and pursuing Barclays’ actions while the FSA didn’t? McDermott explains that the FSA had already been engaged with the BBA’s review of Libor at that time, and liaised with the CFTC. Turner adds that it is a perfectly legitimate question to ask why the FSA did not pick up on some of the signs. He alludes to Barclays’ attitude saying “They were never open enough with us, they were giving us coded messages”.
18:10: Stuart Hosie MP brings up Diamond’s claim that the manipulation of Libor between 2005 and 2007 was effectively the work of rogue traders, asking if Turner accepts that. While the eventual number of people will eventually prove to be “a relatively small number”, says Turner, “nevertheless, there seems to have been a culture that allowed this to occur”. He cites the reference to prices being shouted across the trading floor at Barclays
He says the evidence turned up from the investigations into Libor manipulation at Barclays are likely to be the tip of the iceberg. He says: “I would be amazed if it is everything… if people are acting in a way that leaves a legally identifiable trail, then it’d be very surprising if there were not other activities without a legally identifiable trail.”
18.14: Lord Turner says that Libor was an “accident waiting to happen”. He recites the history of the interest rate, saying it was created in the 1970s as an interbank funding rate; before then being used as a basis for derivatives trades that “had not even existed” when Libor was first created.
18:20: Quizzed by Stewart Hosie on how the Libor manipulation went unchecked for nearly seven and a half years with no one at the FSA spotting it, Turner makes the point that the regulator’s approach was light-touch at the time. He adds that he thinks the reason the issue was not elevated to senior FSA staff was that there was an “implicit assumption” that Libor was an area for the BBA to fix. Asked by Leadsom who is responsible for checking the accuracy of Libor submissions, Turner says it is not a formally regulated process – that’s something that’s bound to change in future…
18.29: In reply to a question from Andrea Leadsom, Turner says that it was effectively not possible to know if Barclays traders actually benefited from manipulating Libor. He says it was not an “effective use of resources” to work out if Barclays benefited. He says the investigation into Libor fixing had been focused on “getting the provable case – which was attempted manipulation rather than actual manipulation.”
18:30: McDermott says Barclays has “bent over backwards” to aid the regulator in its investigation.
Tyrie asks Turner whether given other investigations underway Barclays has been hit by first-mover disadvantage, a line brought by the Barclays representatives. Tyrie says It is important to note that they were fairly cooperative with us. but there wasn’t an unfairness in the process that led to the announcement.
18:37: Turner is enduring a slightly sticky moment at the hands of Michael Fallon MP, who cannot fathom why it took so long for anyone at the FSA to realise something dishonest was going on in Libor fixing. McDermott explains she was in a different role for some of the period in question, while Turner says he first was made aware after former FSA chief Hector Sants briefed him on a potentially major investigation the FSA might become involved in, in November 2009
18.44: Despite some tetchy questioning from Fallon, the Treasury Select Committee has yet to ask crucial questions about its role with Barclays, such as: Why did the FSA clear Jerry del Missier, the witness they had been grilling only an hour ago, of wrongdoing? And why did they not prevent his promotion to chief operating officer when his role in Liborgate ultimately led to his resignation.
18:45 David Ruffley reveals that in contrast to FSA stance that it does not have the powers to pursue criminal investigation into such wrongdoing, some of the committee members have received senior counsel advice that that might not be the case and that the FSA could indeed have pursued criminal probes under things including the 1968 Theft Act or the 2006 Fraud Act.
18.52: McDermott says the regulator does not have a general power to prosecute or investigate criminal wrongdoing but that it could prosecute as a “private prosecutor”.
Ruffley is pressing on why the FSA did not use the option as acting as a private prosecutor in the instance with Barclays. McDermott says it is not the FSA’s area of expertise to bring such cases and that a discussion usually takes place with the relevant authorities who might bring a prosecution.
18.57 It is not entirely clear why the committee are pressing the FSA reps on whether the SFO has been informed that the public want them to pursue the wrongdoers in this case. As McDermott repeatedly makes clear this afternoon, she and the FSA have their duties and responsibilities, while other authorities have their own powers. Whether the committee will get the message that the FSA couldn’t tell the SFO what to do in terms of an investigation and possible prosecutions remains to be seen
19.02: Pat McFadden MP subverts Diamond’s buzzword “good citizens”, first used by the former chief executive in a speech last year on needing to improve the culture and image of banking, to suggest the bank had not exactly come forward to regulators in an honest fashion. Lord Turner agrees with the inference of McFadden’s suggestion.
19:07: McDermott is finally pinned down on something, in this case the number of other banks being investigated over Liborgate by the FSA. Seven, and not all of those are UK firms, she reveals
19:15: George Mudie MP has leapt into scandalised guise, and is incredulous that no one at the FSA looked into this until they did. Turner admits it’s “concerning”, which sends Mudie into near apoplexy.
19:20: Lord Turner shows a brief moment of being flustered after a feisty exchange between an apoplectic George Mudie, who is clearly so outraged that the FSA didn’t act for so long that he wont spare Turner even a second to answer his questions this evening. Luckily Tyrie eventually steps in and gives Turner the proverbial eight-count before letting him carry on answering questions
19.23 There might be a tiny part of Turner that is currently missing Hector Sants at this point. In previous times when the pair appeared before the committee, it was Sants who dealt with the bulk of the tough questioning as the top FSA executive. Chairman Turner has only been in an executive capacity for 16 days, since Sants stepped down at the end of June, so this might be becoming a rather irksome early date in his diary barely a fortnight on.
19.33: And as the questioning gets grumpier after two and a half hours of questioning, the parliamentary bell rings to tell MPs to vote, Tyrie decides to wrap up proceeding.
Viewers will no doubt have got more from the briefer cross-examination of del Missier. Meanwhile, tomorrow, BoE Governor Mervyn King will appear before the panel of MPs tomorrow. Watch out for questions about his deadly eyebrows.