Libor Fixing Scandal: Barclays' Del Missier and FSA Officials Testimonies Most Revealing Yet?

Testimonies to MPs at the Treasury Select Committee (TSC) by ex-Barclays chief operating officer Jerry Del Missier and senior officials at the Financial Services Authority (FSA) could be one of the most revealing hearings to date in shedding light on the London Interbank Offering Rate (Libor) scandal.

After the TSC heard evidence from ex-CEO Bob Diamond, Bank of England Deputy Governor Paul Tucker and then ex-Barclays Chairman Marcus Agius, the overall picture of how much senior officials knew or were involved in during the Libor fixing case over a period of four years, painted a scene of conflicting fragments of evidence.

Testimonies from Diamond somewhat conflicting pieces of evidence from Agius, pushed various MPs to brand Diamond a liar, with repeated comments over how he "deliberately misled this committee."

The TSC Chairman, Andrew Tyrie also made a point of thanking Agius twice for giving more details on senior official awareness, actions and Barclays' relationship with regulators during the time of the Libor fixing scam than Diamond did and said that he wished these sorts of details were more prevalent when Diamond testified.

Questions for Del Missier

While previous hearings with fellow-ex Barclays' employees Diamond and Agius centred on bonuses and "incompetence", it is likely that MPs will draw on key evidence from his ex-colleagues that still remain conflicting with each other.

One of the main pieces of evidence that Del Missier will most likely be needled upon, will be on how he reacted to the now-infamous call between Tucker and Diamond four years ago.

In the memo to Del Missier, Diamond said Mr Tucker had relayed concerns from senior Whitehall figures, over why Barclays' Libor submissions were at the top end.

The memo, which was published on Barclays' website prior to Diamond's TSC hearing, dated 29 October, 2008, read: "Further to our last call, Mr Tucker reiterated that he had received calls from a number of senior figures within Whitehall to question why Barclays was always towards the top end of the Libor pricing. Mr Tucker stated the levels of calls he was receiving from Whitehall were senior and that, while he was certain that we did not need advice that it did not always need to be the case that we appeared as high as we have recently."

While Diamond had said that he was taking the call as a concern over the state of the bank's health at the time and was worried that officials would see Barclays' as having a funding problem, he added that he "did not believe he received an instruction from Paul Tucker or that he gave an instruction to del Missier."

However, Diamond landed Del Missier in hot water after saying that "Jerry del Missier concluded that an instruction had been passed down from the Bank of England not to keep Libors so high and he therefore passed down a direction to that effect to the submitters."

This will be the key point for MPs to grill Del Missier on because it could lead to conviction that Del Missier was directly involved or responsible for the traders that were found guilty of rigging Libor rates, rather than Diamond's and Agius' assertion that they were distant from any criminal activities and in some cases that they had no awareness that rigging rates was even happening until years later.

It could also pin Tucker down if it was felt that he was instructing Barclays to lower their rates.

However, the grilling on the memo evidence could lead to Del Missier embroiling Diamond into the situation further.

If it is found that Del Missier had taken to lower or alter rates under what he perceived as instruction from Diamond, it will throw out most of Diamond's original testimony that he "didn't have any awareness of the Libor rigging investigations until earlier this month [July 2012]."

While, this is a tenuous statement as according to Barclays 2011 annual report, released in March 2012 and signed by Diamond himself, has this paragraph noting the ongoing investigations by regulators into allegations of Libor rate-fixing, extra evidence against Diamond knowing more than he stated, could lead to another round of needling for the ex-CEO.

Don't forget, Agius also provided crucial evidence that he and senior officials knew about Libor falsification investigations at least 2 years ago.

Questions over FSA and Barclays' Relationship

Immediately after Del Missier's TSC hearing, we will be expecting to hear from a number of senior officials at the FSA.

The FSA's Lord Turner, Executive Chairman and Andrew Bailey, Head of the Prudential Business Unit, who were both repeatedly mentioned in the previous hearings and Tracey McDermott, Acting Director of Enforcement and Financial Crime who led the UK's investigation into Barclays, which led to a record settlement fine, will be all under the spotlight in front of the TSC.

While the FSA are unlikely to be grilled like the BoE or Barclays' employees, the questions will most likely shed more light to the public over exactly who knew about the investigations, when they were notified, what instructions and evidence it sought and how much of the previous hearings' evidence corroborates with their filings.

In Agius' hearing, he repeatedly tried to emphasise his and the bank's understanding and relationship, although he admitted that "I don't accept that we had desperate relationship with FSA. Strained would be fine [to describe it]."

MPs will most likely draw upon the, newly dubbed, 'Dear Marcus' letter written by FSA's Turner on April 10 to Agius.

In the letter, the FSA frequently argued for regulatory approaches "which are at the aggressive end of interpretation" at Barclays.

By repeatedly needling Agius on that letter, MPs found out that Agius "would have" sent a letter to Diamond, suggesting Diamond knew about the Libor issues, risk and regulator concerns, before his previously stated comment that he only knew about the Libor event at the beginning of this month.

"I can't remember what day that was [speaking to Diamond about this] but I remember discussing it with him. I certainly would have given a copy of this letter to him. I can't remember," said Agius.

The letter will also be a place to pinpoint with the FSA what they did 'mean' by the letter and what exact thoughts and evidence FSA senior officials delivered in regards to, not just the banking culture and Libor investigation at Barclays but also on the appointment of Diamond, in which Agius said several times that the bank had gained complete "confidence and regulatory approval," over Diamond stepping up as CEO of the bank - despite his lack of experience in retail banking.

After using these key pieces of evidence, MPs were able to nail Agius on FSA criticisms about the "tone at the top" - in other words, senior officials' steerage and attitude over operations and the banking culture.

After saying a few times that the FSA had given Agius the green light about how "the top" were conducting themselves, MPs quoted a letter sent by Agius' a few days after the 'Dear Marcus' letter, saying that "it was clear that the tone from the top from the FSA is a concern."

Agius subsequently fell silent for a few minutes and said that "this was a forward looking a statement," which again called into question as to how long senior Barclays officials knew about concerns and warnings from regulators over its Libor and funding levels and subsequently the level of senior negligible behaviour they conducted.

Looking forward, the Bank of England will appear before the TSC Committee on 17 July at 1000 BST. While the BoE officials will be there to talk about its Financial Stability Report that was published on 21 June 2012 and covers the interim Financial Policy Committee's assessment of the outlook for the stability and resilience of the financial sector, and the policy actions it advises to reduce and mitigate risks to stability - it is tipped that there will be some questions related to the Barclays Libor rigging scandal.

The following BoE officials will be called as witnesses; Sir Mervyn King, Governor of the Bank of England, Paul Tucker, Deputy Governor of the Bank of England, Lord Turner, Member of the interim Financial Policy Committee, Donald Kohn, Member of the interim Financial Policy Committee and Paul Fisher, Executive Director, Markets, Bank of England.