King refuses to back Diamond as 'fit and proper' Barclays boss

Jun 29, 2012

Bank of England governor calls for a change of culture and an end to the shoddy treatment of bank customers

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BANK of England Governor Sir Mervyn King twice refused to give the embattled Barclays chief executive Bob Diamond his backing today as a "fit and proper" person to run the 322-year-old bank.

During a hard-hitting press conference today, King said: "There's something very wrong with the UK banking industry and we need to put it right."

As the Guardian reports, the press conference was to mark the publication of Threadneedle Street's Financial Stability Report. But King took the chance to attack the current culture in the banking industry and call for an end to the shoddy treatment of bank customers.

The two scandals that Barclays are embroiled in - for manipulating the Libor rate and for mis-selling loan insurance policies to small business - represent a problem "that goes to both the culture in the banking industry and to the structure of the banking industry, from excessive levels of compensation, shoddy treatment of customers, to deceitful manipulation of one of the most important interest rates and now this morning to news of yet another mis-selling scandal."

King spoke of the need for "a real change in the culture of the industry. And that will require two things. One is leadership of an unusually high order and changes to the structure of the industry."

King dismissed calls for Leveson-style hearings into the banking industry, saying "We don't need any inquiry to know what we should be doing. There must be many people who work in banking today who know that they are honest, hard-working and feel they have been let down by some of their colleagues and indeed their leaders."

He also warned that the current scandals "generated a great deal of uncertainty around the economic outlook and exposed severe vulnerabilities in the European banking system." Going forward, King said it was "crucial the banks' efforts to improve resilience should not come at a high cost to the real economy. Alongside capital-raising, banks can improve their resilience by reducing the riskiness of their balance sheets, and by bolstering investor confidence, for example by seeking to reduce the degree of uncertainty around the possible impact of the euro-area crisis on their balance sheets."

In the wake of the governor's devastating vote of no-confidence - supported by FSA chairman Lord Turner, who also refused to publicly back Diamond - the odds of 2/7 offered by bookmakers William Hill on Bob Diamond remaining in place at the beginning of August seem set to lengthen.

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In other words.. no change.