Bob Diamond: Barclays boss worth £105m at heart of Libor scandal

Bob Diamond: Barclays boss worth £105m at heart of Libor scandal

By Simon Lambert

PUBLISHED: 06:39 EST, 29 June 2012 | UPDATED: 08:53 EST, 29 June 2012

Bob Diamond is the poster boy of casino banking. The Barclays boss made his name and much of his reported £105m fortune in the Barclays Capital arm of the bank that now sits at the heart of its part in the Libor scandal.

And depending on who you talk to, Diamond is either a modern day banking great or the archetypal financial devil.

The divided attitude towards Diamond’s success reflects the tension between City cheerleaders who see him as a hero and a public furious at the financial industry's excess.

Poster boy: As boss of Barclays Bob Diamond is London's most high profile banker and made his name as a star in its casino banking arm

As chief executive of Barclays, the 60-year-old American is arguably London’s most prominent banker â€" and one of our most controversial figures in a 21st century Britain torn between celebrating the money the City brings in and deploring the reckless greed it has engendered.

The controversy is hardly surprising when Diamond has made statements such as the one to the Treasury Select Committee 18 months ago, which should now be coming back to haunt him.

Appearing before MPs to be grilled on bank’s behaviour and bonus culture, he said: ‘There was a period of remorse and apology for banks. I think that period needs to be over.’

Clearly, based on the Libor fiddling revelations of the past few days the time for saying sorry had not ended.

To that end Diamond yesterday gave up his bonus for the year ahead, as he sought to firefight the fallout from Barclays’ £290m worth of UK Financial Services Authority and American financial authority fines, imposed for manipulating submissions for the benchmark money market lending rate Libor.

Diamond, a married father of three, is unlikely to end up slumming it though.

Pugh on the ongoing banking scandal

In a world where it seems only those who work in the gambling arms of the banks can outstrip the earnings of star footballers, the rather aptly named Diamond has struck it seriously rich.

The Sunday Times Rich List 2012 put his personal fortune at £105m and says that the 2009 sale of Barclays’ fund management arm Barclays Global Investors made him £26m.

In March this year, it was revealed that in 2011 Mr Diamond’s base salary was £1.35m, rising to £6.3m with bonuses, but in total he got £17m, once salary, bonuses, shares, perks and his tax bill consideration were included.

That’s not bad for a man who began his career as a lecturer at the University of Connecticut, albeit after being awarded the top MBA from its business school.

From there he moved to Morgan Stanley in 1979 to work as a bond trader, taking the first step into the markets on his long and lucrative journey from  growing up in Concord, Massachusett s, where he was one of a nine children, to the pinnacle of global finance in London’s Canary Wharf.

He moved from Morgan Stanley to Credit Suisse and by 1992 was running its Asian operation. Diamond joined Barclays in 1996 and shaped its Barclays Capital investment banking and trading arm into a slick money-making machine.

Barcap, as it was dubbed, delivered bigger and bigger chunks of Barclays overall profits in a period when banks were surfing a wave of cheap money to massive profits.

Diamond’s own salary and bonuses began to hit the headlines after he joined the bank’s main board in 2005, at which point his pay details had to be published. 

In our special report into how Diamond made his millions in January 2011 Ben Laurance said: ‘Since then his pay, bonuses, share options and sundry extras are reckoned to have brought in a to tal of £75m.’

In 2007, his total package was reported to be £27m, thanks a £10.7m cash bonus and variety of share option stopping up a basic salary of £250,000.

THE BANK LIBOR SCANDAL UNFOLDED

Libor stands for the London Interbank Offer Rate and is a measure of the interest rate banks charge to borrow between each other.

The rate is set every morning by a panel of banks and overseen by trade body the British Bankers’ Association. Each bank sets the rates at which it believes it can borrow, from overnight to 12 months.

Barclays was fined for manipulating its submissions both up and down as traders sought to profit from movements and during the height of the banking crisis making the bank appear more stable due to lower borrowing costs.

Barclays is not the only bank invoved, at least 20 more are also under investigation, with Chancellor George Osborne saying RBS and HSBC were included

Barclays chief executive Bob Diamond has insisted he will not resign over the interest-rate fixing scandal despite growing pressure.

Mr Diamond was speaking at a meeting of analysts at US bank, Morgan Stanley.

Mr Diamond, who reportedly stands to receive a severance package worth more than £20million if he does step down, has agreed to give evidence to MPs about the conspiracy, in which staff rigged the key lending rate between banks.

‘But in reality Diamond was seriously rich even before his elevation to the bank’s top table, after making tens of millions from an obscure share scheme run by one of Barclays’ offshoots', says Laurance.

This was the lucrative BGI share scheme for executives and investment stars introduced at the turn of the century. They got options over shares in BGI â€" the right to buy at an agreed price in the future â€" the idea being that this enable staff to share in success, as if the business did well the shares would rise in value and so could be picked up cheap at the option price.

In the six years that followed the introduction of this ‘equity ownership plan’, employees at BGI picked up £1.26bn by cashing in their share options.

In the first half of 2006 alone, BGI employees spent £26m as they exercised share options which they were then able to sell back to Barclays for a total of £211m. Exact details were no t included in the annual report of the main Barclays Group and as there was no open market in BGI shares, their price and therefore the profits being made was determined internally.

Diamond’s earnings throughout the BGI years are unclear as they are not on public record

But in 2009, Barclays agreed to sell BGI to US fund management house Blackrock for £8.2bn and it emerged that Diamond had BGI shares worth almost £27m under options for which he had paid just £6m.

All of this contributed to Diamond being branded the ‘unacceptable face of banking’ by Peter Mandelson, strong words from a man not averse to the attractions of wealth himself.

Mandelson claimed to The Times that Diamond had been paid £63m â€" a figure Barclays refuted and said was ‘a total fiction’, pointing out that Diamond had taken no bonus on both 2008 and 2009.

What Mandelson was referring to, however, was the host of share-based schemes in the Barclays annual report, along with the value of Diamond’s BGI stake.

On top of Diamond’s relatively modest £250,000 base salary at the time, these delivered £16m worth of shares released from earlier schemes, laid out almost £20m worth of future performance-related pay share schemes and included the £27m from BGI.

All of which simply serves to illustrate how fiendishly difficult it is to put an exact figure on what top bankers actually earn.

The public anger at these stratospheric sums has continued to grow as the financial crisis rumbles on and more details of banks’ bad behaviour emerges.

Until now Diamond, who has been on the receiving end of much of that fury, has been able to claim he and other Barclays top figures are worth it.

As chief executive of Barclays plc since early 2011, deputy chief executive from autumn 2010 and before that the chief executive of Barclays Capital, that line of de fence is to be expected.

One of the key points in it is that Barclays did not take a direct bailout from the UK taxpayer at the height of the banking crisis in 2008-9, as rivals were forced to - it escaped this by selling a major stake to Middle Eastern investors.

However, it did benefit hugely from the implicit support from the government for any UK bank - this has dramatically reduced their borrowing costs and therefore artificially boosted profits.

Barclays has also benefited from the base rate being slashed to 0.5 per cent and tapped special lender support schemes.

The other point in the defence of high rewards, especially for Diamond was his buccaneering move to buy the best assets of failed US bank Lehman Brothers, turning Barclays into a major player in global investment banking.

Diamond has also sought to soften the banks image, talking in a BBC Today programme lecture last November, of rebuilding trust, banks bei ng better citizens and putting customers and clients at the heart of the banks’ culture.

Now with Barclays reputation back at rock bottom and calls for Diamond’s head, that public relations plan to make us like our banks again has gone seriously awry.

THE WORDS THAT WILL COME BACK TO HAUNT BOB DIAMOND

Enlarge  

Under pressure: Bob Diamond, chief executive of Barclays

On 3 November 2011, Bob Diamond, chief executive of Barclays, delivered the BBC Today programme’s inaugural business lecture.

‘Rebuilding trust requires banks  to be better citizens. I believe  in this passionately.’

Within a few months of making this statement, Barclays was found guilty of a tax avoidance plot to rob taxpayers of around £500million.

Earlier in 2011, it had been found guilty of enticing elderly customers to gamble their life savings on the stock market. Around 12,000 customers lost half their savings. And this week it was found guilty of a ‘serious and widespread’ attempt to manipulate the Libor interest rates and ordered to pay a fine of £290million.

‘I know how angry customers are about issues such as payment protection insurance. That’s why we are working hard to clear claims as quickly as possible. We want to put things right.’

When a person takes out a credit card or personal loan, they buy the insurance to pay out if they lose their job, or have to stop working due to poor health. But banks, including Barclays, were selling the policies to people who did not need them. Barclays said the PPI scandal would cost them £1billion. Four months after making this speech, he admitted the bill had increased to £1.3billion.

‘But for me the evidence of culture is how people behave when no one is watching them. Our culture must be one where the interests of customers and clients are at the very heart of every decision we make, where we all act with trust and integrity.’

The Financial Services Authority this week found Barclays guilty of misconduct ‘extended over number of years’. The US Department of Justice said simply that the bank was guilty of ‘illegal conduct’ on its attempts to manipulate the Libor rate. The culture of Barclays allowed traders to manipulate Libor in a bid to make sure they scooped millions in bonuses, and to pretend the bank was in a healthier state than it was.

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