Tag Archives: FSA


Translated from the French by Tim Gupwell

Up to now in the LIBOR affair, the witness statements before the parliamentary select committee have essentially seen everyone lying to protect their own interests. The inevitable result is a sort of cacophony, compounded by strategy changes half-way through, which was particularly the case for Bob Diamond, former Chief Executive of Barclays, who one day sought to bring down with him Paul Tucker, Vice-Governor of the Bank of England, only to attempt the following day to absolve him of any responsibility, with the catastrophic result you can easily imagine.

As for the officials, regulators and managers of the Bank of England, the performance was not much more convincing: “saving one’s ass” as one says in Shakespeare’s language, saving one’s skin (“sauver sa peau”), as one says more politely in Molière’s language.

Jerry Del Missier, Chief Operating Officer, N° 3 at Barclays until only a few days ago, chose a completely different strategy: honesty. It is difficult to say whether it was 100% sincere, but whatever it was, it was close to 90%, and probably more than that. And this strategy is, of course, far more effective due to the not entirely surprising reason that while there may be a thousand different ways of lying, there is only one way of telling the truth – which prevents one from getting too muddled up.

Obviously, the collateral damage is tremendous since in his candour, del Missier dragged absolutely everybody into it – not just the liars of recent days but also some new protagonists whose names he freely quoted, despite them having not been mentioned up to now

When he was asked, ‘if as you maintain, the orders coming from on high were encouraging you to manipulate the rates downwards, were there no alarm bells ringing at the thought that it was illegal?’, he responded ingratiatingly, ‘well…no, because effectively it was the only reasonable thing to do to save the system”.

Why have the others not adopted this approach, and consequently sacrificed tens of millions of Pounds Sterling in salaries and bonuses? Because the Golden Calf once said to the crowds kneeling before it, “Finance regulates itself, and the promised earthly paradise will only come to pass when there are no regulators or governments!”; and these tens of lost millions represent little if they are the price to pay for ensuring that their children and their childrens’ children can continue repeating the words of the Golden Calf for centuries to come.

Jerry del Missier, former C.O.O. of Barclays

Mervyn King, Governor of the Bank of England, Paul Tucker, Vice-Governor of the Bank of England, Adair Turner, President of the Financial Services Authority, the British regulatory authority.


LE MONDE-ÉCONOMIE, The LIBOR affair…… a scandal postponed from 2008, Monday 16 – Tuesday 17 July 2012

My most recent column in the French daily paper Le Monde : Le scandale du Libor, c’était en 2008. Translated from the French by Tim Gupwell.

When the LIBOR affair first broke in April 2008, the press comments were laconic to say the least. Last month, when the fire that had been smouldering flared up again with the conviction of Barclays for having manipulated the rates that govern the loans (in dollars) that banks contract amongst themselves, we saw media fireworks. At the time Barclays was one of the 16 banks (which number 18 today) responsible for submitting the data which allows the rates to be calculated.

An event which had led to little more than raised eyebrows in the spring of 2008 is now rocking the very foundations not only of the City but also of the entire world of finance. One has to wonder how the principle governing the dynamics of indignation works, when, at two distinct moments, public reactions to the same event can be of such differing orders of magnitude.

How could there be such indifference at the time when the facts emerged, and yet such a seismic shock over recent weeks that it lead to the resignation of three senior Barclays managers, as well as casting suspicion upon the candidate expected to take over as head of the Bank of England, and by association, on the British Government at the time. George Osborne, Chancellor of the Exchequer, declared that the facts revealed were symptomatic of a financial system that elevated greed above all other concerns and brought our economy to its knees” and added that “fraud is a crime in ordinary business; why shouldn’t it be so in banking?”

The payment of a sizeable fine by Barclays (365 million Euros) ought to have been a way of turning the page on events that already dated back several years. All the more so since it is clear that, of the sixteen banks, Barclays was certainly one of the lesser offenders in the LIBOR affair, and had shown good faith by cooperating with the authorities, something which explains why it benefited from a 30% reduction in its fine in Great Britain.

It would be over-simplistic to talk of a simple communications exercise gone wrong since we are talking here about judicial decisions, but the regulators might have hoped that the end of the affair would be received by the public with the same sort of indifference they exhibited when the story first broke in April 2008. It was nothing of the sort. But why did it take four years for this public indignation to finally be ignited?

The explanation requires an allusion to what physicists would call a ‘non-linear’ effect: the very act of crossing the threshold suddenly causes the nature of a situation to change. One thinks of the Wizard of Oz (1900) of Frank Baum, where the accidental opening of a curtain leads to the discovery that the enchanted world (which could be seen as a metaphor for the American monetary system) is nothing more than an artifice produced by an old man pushing levers.

The thing that brutally lifted the curtain for the British and showed them in what light the LIBOR affair should be viewed, was of course the Rupert Murdoch affair.

The British were to make the discovery in 2011 that 4000 of them had had their voicemails hacked into by The News of the World, part of the gutter press belonging to the media empire of Rupert Murdoch, an American citizen of Australian origin. Amongst his victims were celebrities, members of the Royal Family, but also ordinary people: soldiers back from Afghanistan and survivors of the London bombings.

The affair came to prominence when the telephone of a murdered teenage girl was hacked into, and certain messages deleted, by a News of the World journalist, giving her closest family false hopes that she was still alive. The victims’ complaints never came to anything, because, at the time, Murdoch was also corrupting the police services who therefore attempted to cover the affairs up. As public opinion exploded into anger attention quickly switched to the revolving doors policy which existed between Murdoch’s cronies and members of the British Government. The relations between David Cameron, the Prime-Minister, and Rupert Murdoch himself, were undoubtedly a little too close for comfort.

Under this new light, Barclays short-sighted fraud, revealed in the explanations given by the FSA (Financial Services Authority), the British regulatory body, could no longer be seen as everyday dishonesty and instead came to be seen as just one more revelation amongst many others of an arrogant managing class, which does not trouble itself with rules, and organizes its affairs as it sees fit, whilst still maintaining a bare minimum of appearances

The LIBOR affair is the story of the devotee who has always accepted as gospel truth the preaching of his priest, but who suddenly stops believing everything he has heard because he has accidentally discovered that the beard his priest wears is false.

The question which needs to be asked now is the following: if the fall of the least guilty of the banks responsible for the LIBOR has already provoked such a dramatic collapse, what can we expect when the punishment reserved for the others is revealed?



Translated from the French by Tim Gupwell

Paul Tucker, Deputy Governor of the Bank of England, made a statement this afternoon before a British Treasury Select Committee. The reason for his presence today was that on the 4th July, before this same committee, Bob Diamond (who was the Chief Executive of Barclays until a few days ago) had hinted that he had been under pressure from Tucker for the bank he managed to submit lower figures for its inter-bank borrowings than the figures it was actually submitting. The figures in question were used at the time by the British Bankers’ Association to calculate the interest rates known as LIBOR (London interbank offered rate): the interbank rates (in dollars) prevailing in London. During the course of a conversation between Tucker and Diamond, the first is claimed to have said to the other that “you wouldn’t suggest anybody doing anything wrong” if Barclays submitted lower figures than it had been doing. Tucker is said to have declared that he was being leaned on himself in this respect by senior members of the Government.

If Bob Diamond’s interpretation of his conversations with Tucker was correct, then a key figure at the head of the Bank of England was inciting one of the Executive Managers of the second biggest commercial bank in the country to manipulate the LIBOR, a rate which constitutes a reference point for the entire international financial system.

My feeling having watched this hearing from start to finish is that Tucker, once widely touted as a replacement for Mervyn King at the head of the Bank of England, has blown his chances. Mind you, I am still the same person who was convinced that Jérôme Kerviel’s trial (the first episode at least, not the recent appeal) would definitely not lead to a conviction!

Tucker’s explanation of the events was that there has been a misunderstanding about the meaning of the conversations he had had with Diamond. At that time Barclays had refused government aid, in the form of a massive capital injection, as it feared that accepting these sums would almost inevitably have lead to its nationalization. Barclays is said to have got round this a little later thanks to a capital investment from the sovereign funds of Qatar. What Tucker was trying to do – according to him yesterday – was to inquire after the health of Barclays: did the rates submitted, which were higher than its peers, signify that the bank was in difficulty?

Paul Tucker is definitely not a great actor: he mechanically poured himself water and started to drink as soon as he was in any difficulty. At times, when posed a question by his interrogators, he appeared utterly panic-stricken, manifestly worried about where it might lead to. Nor was he very assured on the question of what brought him there: when the chairman of the committee highlighted the fact that the committee was called at his request he replied half-heartedly that “You’ve asked me to come voluntarily”, which led the chairman to declare ironically, “largely at your request”.

What conclusions can be drawn? In a formal sense, that today, in the West, we are still living in a democracy. During Goldmans Sach’s hearing in April 2010 (l’audition des dirigeants de Goldman Sachs, en avril 2010), I wrote here:

At this moment in time, I have been at this hearing for two hours. What amazes me is the robustness of this democratic regime, in spite of all the forces ranged against its correct functioning, in spite of the colossal sums which are paid out to lead it astray. It is virtually a miracle to me that people like Senator Carl Levin manage to conserve – despite the great money machine crushing all before it – the integrity that enables them to oppose this steam roller, as he is doing now before my very eyes.

I feel the same way this evening: we are still living in a democracy, at least in what concerns the quality of information I am able to access. To my great satisfaction, it is this information in fact which enables me to read with great clarity between the lines of what is said.

All that remains is for me to be able to explain with just as much satisfaction why all this remains without consequences, and why no decision is ever taken along the lines of my understanding of it.

In the case of Kerviel’s first trial, the verdict seemed to entirely ignore all that had been said during the hearings. Or rather, to ignore what I had been able to read between the lines of what had been said. And it is this which is without doubt the essential point: is the ruling class incapable of reading between the lines? Or does it know how to do it, but count on the fact that it will, more or less, be the only one capable of doing so and that everybody else – and in particular the average voter – will never be able to do so, and will therefore never ask for accounts to be rendered?



Translated from the French by Tim Gupwell

From the Financial Services Authority’s Final Notice of their decision, dated the 27th June, to impose an 85 million Pound fine on Barclays Bank (less a reduction of 30% for exemplary co-operation with the enquiry) due to their manipulation of the LIBOR interbank rates, two separate periods need to be distinguished. In the first period, which loosely spans the period from 2005 to 2007, rates were manipulated on trading floors by operators at a subordinate level; in the second period, which runs from 2007 to 2009 and which corresponds to the height of the crisis, rates were manipulated by these same subordinates following instructions from above.

Unambiguous figures are to be found in the conversations reported in the documents. During the first period, the rate manipulations were usually around about 1 basis point (a hundredth of 1%) and sometimes 1.5 basis points; in the second period, it was a matter of manipulations varying from 17 to 46 basis points. In other words, they were of a completely different order of magnitude.

When Bob Diamond, the former Chief Executive of Barclays, explained last Thursday to a British Parliamentary Select Committee that he had been “shocked” and “disgusted” by the behaviour of some of his employees, was he talking about the rank and file traders (the dozens of Kerviels that I discussed (in French) in my Friday video) during the period from 2005 – 2007, or about the Senior Bank Officers from the period 2007 to 2009? In my opinion, to ask the question is to know the answer.

That said, as I recalled in my accounts of the ‘LIBOR affair’, from the earliest in April 2008 (L’affaire du LIBOR) [in French], to the most recent (LIBOR: Delayed indignation), it can be said that on the one hand, minimizing the rates submitted by the 16 banks concerned for the calculation of the  LIBOR virtually amounted to a national duty in the climate of panic which had caught hold of the financial markets; and, on the other hand, according to what we already knew in 2008 and which was confirmed in the Final Notice, of all the London Banks it was in fact Barclays which was the most reluctant to falsify the figures. The following observation is representative of this point of view:

“….on 18 September 2008, a Submitter stated in a telephone conversation with Manager D that he would put in a one month US dollar LIBOR submission of 4.75 because that was where he had obtained money in the market…. The Submitter agreed to lower Barclays’ one month LIBOR submission to 4.50. The next highest submission was 50 basis points lower than Barclays’ submission on that day.” (p.30)

Let us be clear about this: 1) From 2005 – 2007, a “dozen Kerviels” working for Barclays regularly submitted, for the purpose of calculating the LIBOR ( at the same time as the 15 other banks), rates that had been manipulated upwards or downwards to the tune of 1 to 1.5 basis points. 2) From 2007 – 2009, in the case reported, a Senior Bank Officer instructed a subordinate to minimize the rate observed by 25 basis points. 3) On the same day, in another bank in the city of London (the one which manipulated the rates the least amount after Barclays), a senior Bank officer instructed a subordinate to submit in the bank’s name a rate which had been manipulated by at least 75 basis points – 25 [like Barclays] plus 50 [additional].

In conclusion, we can say that of the sixteen banks which submitted rates for the calculation of the LIBOR (18 nowadays), fifteen cheated even more than Barclays. This latter had a 85 million Pounds (107 million Euros) fine imposed upon it (before it was reduced), and has lost, since last week, Chief Executive Bob Diamond, Chairman Marcus Agius, and Chief Operating officer Jerry del Missier – who were all firmly shown the door by the FSA, the Bank of England and the Chancellor of the Exchequer. This latter, George Osborne, declared that the facts revealed were “symptomatic of a financial system that elevated greed above all other concerns and brought our economy to its knees” and added that “fraud is a crime in ordinary business; why shouldn’t it be so in banking?”

We can only approve of the British Chancellor’s remarks. But what do the mangers of the other 15 banks who were responsible for submitting rates for LIBOR think of all this? In any case I would rather be in my shoes than theirs.