Barclays CEO Bob Diamond resigned this morning, the highest-profile casualty of an interest rate-rigging scandal that involves more than a dozen major banks around the world.
The British bank agreed to pay $450 million last week to settle accusations that it had tried to manipulate key interest rates. The rates are used to determine the cost of things like credit cards, mortgages, and home loans. Other banks involved in the scandal include JPMorgan Chase and Citigroup.
Rob Watson, a correspondent for the BBC, believes that this was not all about Diamond. "I don't think this about one man," Watson says. "There is a sense that this is something much wider." While Barclays did pay out a huge sum in penalties, the Financial Services Authority, Britain's regulatory body, is continuing to investigate other major banks' possible actions in the interest rate manipulation scandal. Secondly, there will be a closer look at the manipulation of Libor, the interbank lending rate.
Britain's coalition government also wants Parliament to lead an inquiry into the culture of high-powered investment banks, while the opposing Labor Party is pushing for a judge-led approach. This was a culture that permitted open discussion of the manipulation of interest rates like the Libor, which affects all kinds of rates around the world. Deputy Prime Minister Nick Clegg placed the blame on the top leaders of Barclays when he said, “Now that the chairman of Barclays [Marcus Agius] has fallen on his sword and has taken responsibility for what has happened, everybody is asking when are the other senior people at the top of Barclays going to take responsibility for the things that happened on their watch. I don’t think it is for politicians to individually hire and fire bankers, but I do think the buck stops at the top.”
Barclays and other financial institutions have also come under fire from members outside the United Kingdom. The recent investigations prompted critical comments from president of the European Commission, José Manuel Barroso: "We have seen, once again, in recent months and weeks, both in the United States and Europe, including some of the major banking institutions, that practices that have fueled financial crises are not yet eradicated rom the center." Watson believes that critics of Barroso's accusations will call the speech "an extremely political bit of posturing."
"There is a view amongst critics that yes, of course, there has been a banking crisis, and sometimes that gets labeled as something Anglo-Saxon, but I think an awful lot of economists will tell you, 'Well, that's one thing,'" Watson says. "But completely separately to that, the Eurozone has managed its affairs very, very badly. Lots of governments in the Eurozone have been living way beyond their means, and spending far more than they got in revenues."
The recent investigations have prompted greater scrutiny and more call for financial reforms in the United Kingdom, including legislation for increased shareholder oversight on banking executives' salaries. "There have been changes on the way," Watson says.