Diamond resignation: pushed by King, applauded by Osborne

Jul 3, 2012
The Mole

Departure came after 'unambiguous' pressure from Mervyn King and Lord Turner, claims Robert Peston

IT WAS becoming increasingly clear this morning that Sir Mervyn King, governor of the Bank of England, and Lord Turner, chairman of the Financial Services Authority, were the driving force behind Bob Diamond’s sudden decision to quit Barclays Bank over the Libor rate-fixing scandal.

BBC business editor Robert Peston claims the two men sent an "unambiguous" message to Barclays chairman Marcus Agius yesterday that they would be "happy" if Diamond resigned.

Peston says they were unable to force the American out because he had not been found personally culpable in the FSA’s investigation into the manipulation of Libor interest rates. But they were able to make their feelings very clear.

The decision certainly takes the heat off the Chancellor and the Prime Minister. You could almost hear the sighs of relief from George Osborne when he appeared on the BBC Today programme this morning, just half an hour after the official announcement of Diamond’s departure as Barclays CEO was made.

"I think he has done the right thing. I hope it is a first step towards a new culture of responsibility in British banking," said the Chancellor, who feared the Libor rate-rigging scandal was doing untold damage to the reputation of London as a world banking centre. Barclays shares immediately rose on the stock exchange at the news.

There is now likely to be a row over Diamond's pay-off. Within minutes of his decision to quit, Tom Watson, the Labour MP who led the campaign against Murdoch and phone hacking, tweeted: 'First question after Diamond resignation: what's the pay-off?' By mid-morning, the figure of £17m was being bandied about.

Osborne was told last night by Agius that the board had decided that Diamond must go. Only yesterday morning, Agius had resigned, saying: "The buck stops with me.'" But in a remarkable about-turn Agius un-resigned today and took over as full-time chairman with the task of steering Barclays through the storm and finding Diamond's replacement.

Asked by Today presenter John Humphrys whether he had told Agius that Diamond was "not the appropriate man" to rescue Barclays' reputation, Osborne replied: "No. I was very clear it is not the job of the Chancellor of the Exchequer or the Prime Minister or anyone else in government to decide who should run a private company."

There's no doubt Diamond's resignation helped take the heat off the Chancellor, who would otherwise have been facing awkward questions about Diamond clinging to his job.

But will it take the heat of David Cameron, under fire from Labour for refusing to appoint a full judicial inquiry into the banking industry?

The PM is keen to avoid bankers appearing in the dock, opening him up to the charge of protecting his rich friends in the City. So he's appointed the senior Tory backbencher Andrew Tyrie to head a parliamentary inquiry of peers and MPs to take evidence under oath. But that has failed to satisfy Labour.

This morning Tyrie was still threatening to quit as the chairman of the inquiry if Labour go ahead with a threat to vote against it.Tyrie said: "If I don't have cross-party support I won't do it."

Labour is tabling a motion in the Lords opposing the setting up of the parliamentary inquiry and is threatening to do the same in the Commons next week.

Osborne said Diamond's resignation will not affect the decision to appoint Tyrie to run the inquiry. He and Cameron are hoping that Labour's motion is defeated in the Lords and that Miliband is then forced to have a rethink.

So, where does Miliband stand? The New Statesman claims Diamond's resignation is another feather in the Labour leader's cap (after his tough stance against the Murdochs over phone hacking) because he was the only political leader to actually call for him to resign. Once again, "he has set the political pace".

Tim Shipman, the Daily Mail's deputy political editor, agrees, pointing out on Twitter that Miliband used his speech to the 2011 Labour conference to rail against predatory capitalism. That speech "doesn't look quite so daft now, does it?" asks Shipman.

The Mole is not totally convinced. The trouble for Miliband is that the resignation has relieved the pressure on the Tories. By agreeing to step down, the Barclays CEO has shot Miliband's fox.

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