CEO Diamond Vows New Controls in Wake of Rate Scandal; Chairman Leaves

Updated July 3, 2012 4:43 a.m. ET

LONDON— Barclays PLC Chief Executive Robert Diamond apologized for the interest-rate manipulation scandal that has engulfed the U.K. bank but resisted outside pressure to resign.

Barclays said it will pay $453.6 million to settle a long-running probe by U.S. and U.K. regulators into allegations that traders manipulated interbank lending rates. Explore the bank’s settlement with the U.K.’s FSA.

Barclays, meanwhile, was reviewing the bank’s succession plans, according to a person close to the bank. Antony Jenkins, head of global retail and business banking, and Jerry del Missier, a longtime co-head of the investment bank who was recently made chief operating officer, could eventually succeed Mr. Diamond, this person said.

The person said that Mr. Diamond has no plans to step aside because of the scandal.

The letter came as Barclays confirmed the resignation of its chairman, Marcus Agius, who held that post since 2007.

In a statement, Mr. Agius took responsibility for the bank’s $453 million settlement, announced last week by U.S. and U.K. regulators, of an interest-rate-fixing probe. Mr. Agius said that the buck stops with me.

The comments by Messrs. Diamond and Agius appeared to do little to quiet concerns among investors and analysts.

The bigger issue remains whether Mr. Diamond should also remain in his role, said Gary Greenwood, a U.K. bank analyst at Shore Capital in London. We question whether the negative sentiment towards the company…can be repaired while he remains at the helm.

Read More

Mr. Diamond already had faced criticism from U.K. politicians about his bonuses and from some shareholders and directors over Barclays’s financial performance.

On Monday, the U.K. government unveiled new measures aimed at identifying and punishing people involved in rate-fixing, and the U.K.’s Serious Fraud Office said it is considering whether criminal charges are appropriate.

Mr. Diamond is likely to face hostile questions Wednesday by a U.K. parliamentary panel, where he will discuss Barclays’s involvement in attempts by banks around the globe to rig a widely used interest rate, the London Interbank Offered Rate, or Libor.

Barclays was the first bank to reach a broad settlement with regulators, and the U.S. Justice Department said the company’s cooperation had been extraordinary and extensive. U.S. officials said that the nature and value of Barclays’s cooperation has exceeded what other entities have provided in the course of this investigation.

Libor: What You Need to Know

What it is: Libor – or the London interbank offered rate benchmark – is supposed to measure the interest rates at which banks borrow from each other. It is based on data reported daily by a 16-bank panel. Other interest rate indexes, like the Euribor (Euro interbank offered rate) and the Tibor (Tokyo interbank offered rate), function in a similar way.

Why it’s important: More than $800 trillion in securities and loans are linked to the Libor, including $350 trillion in swaps and $10 trillion in loans, including auto and home loans, according to the CFTC. Even small movements – or inaccuracies – in the Libor affect investment returns and borrowing costs, for individuals, companies and professional investors.