The head of Barclays bank became the first
high-profile victim Tuesday of a widening rate-fixing scandal that
threatens to engulf other international banks and harm London's
reputation as a major financial centre.
Bob Diamond, Barclays chief executive, resigned with immediate effect, following days of intense pressure over the bank's role in manipulating the interbank lending rate, known as Libor, for greater profit.
His decision to step down was followed hours later by the departure of Jerry del Missier, the bank's chief operating officer, who had worked closely with Diamond.
On Monday, Barclays chairman Marcus Agius announced his resignation over the scandal.
But, in a bizarre turn of events, Agius was reappointed on a temporary basis Tuesday to oversee the urgent search for a new leadership team at Britain's third-biggest bank.
The developments came a week after Barclays was given a record fine of 290 million pounds (451.6 million-dollars) by US and British regulators for manipulating of a key interbank lending rate.
Other British and international banks are also being investigated for the same alleged malpractices, which took place between 2004 and 2009.
Diamond, a US citizen who joined the bank in 1996, has denied any role in the rate-rigging scandal, which occurred when he was head of Barclays Capital, the bank's profitable investment arm.
"The external pressure placed on Barclays has reached a level that risks damaging the franchise," Diamond wrote in his resignation letter.
"I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth."
The misconduct related to the daily setting of the London Interbank Offered Rate, or Libor, and its equivalent in Europe, Euribor, between 2005 and 2009. The Libor is used in establishing daily lending rates.
Diamond is set to give evidence to a parliamentary committee on the affair in London on Wednesday, where he is expected to defend his position.
He previously came under attack for excessive bonus payments, taking home earnings and rewards totalling more than 20 million pounds in 2011.
His resignation was welcomed Tuesday by Chancellor of the Exchequer George Osborne, who said it was the "right decision for the bank and for the country."
"I think and I hope that it is the first step towards a new culture of responsibility in British banking," said Osborne.
Adair Turner, the head of the Financial Services Authority (FSA), Britain's banking watchdog, said bankers attempting to rig the Libor rate had dealt a "huge blow" to the industry's reputation.
"The cynical greed of traders asking their colleagues to falsify their Libor submissions so that they could make bigger profits has justifiably shocked and angered people, in particular when we are facing hard economic times provoked by the financial crisis," Turner said in London.
Meanwhile in Strasbourg, European Commission President Jose Manuel Barroso said the scandal showed that the roots of the 2008 banking crisis had still not been fully addressed.
"Once again, we have been confronted with reckless trading and market manipulation," he told European Union lawmakers during a debate on the economy. "It is time that these practices stop once and for all."
"We have seen once again in recent months and weeks - both in the United States and in Europe, including in some of the major financial institutions - that practices that have fuelled the financial crisis are not yet eradicated from the sector," he added.
Investigators in both the US and Britain are looking at other banks to see how far the collusion to control the Libor rates might have gone.
European Union competition regulators are carrying out their own investigations into financial derivatives linked to benchmark interest rates, with unannounced bank inspections.
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