Barclays 'was in state of denial'

Sir Mervyn KingBarclays was in a "state of denial" over regulatory concerns with the bank following its rate-rigging scandal, Bank of England governor Sir Mervyn King has told MPs.

In a Treasury Select Committee hearing, Sir Mervyn said there were "genuine and deep" concerns among regulators over governance and a loss of confidence in the bank's bosses.
He said Barclays had been found to "sail close to the wind" a number of times with regulators, which indicated a worrying pattern of behaviour. But he said the bank and its board had failed to take on board the seriousness of the regulatory concerns.

Sir Mervyn also claimed he was not aware of deliberate rate-rigging until the full scale of the Barclays scandal came to light.

His comments come after news last week that Sir Mervyn discussed concerns over Libor - the interbank rate at the heart of the scandal - with New York Federal Reserve president Timothy Geithner at least four years ago, raising questions over why the Bank had not acted sooner to stamp out rate-fixing.

Sir Mervyn said he shared worries with Mr Geithner over the governance of Libor, but there was no evidence at the time of "wrong-doing". Asked when he was made aware of the Libor-rigging, Sir Mervyn replied: "The first I knew of it was when the reports came out two weeks ago."

The committee turned to Bank deputy governor Paul Tucker about a New York Federal Reserve report in 2008 that flagged "deliberate misreporting" of Libor. Mr Tucker said the report did not "set alarm bells ringing" that dishonesty was taking place but it did raise concerns about "credibility".

MP Andrea Leadsom asked the governor if the Bank had "got to the bottom" of how individual derivative traders fiddled Libor submissions to boost their own profits. He replied: "We're not an investigative body... It took regulators three years to find out it was being done."

Sir Mervyn said it was acceptable to "sail close to the wind" once or twice but when it kept recurring "you have to ask questions about the navigational skills of the captain on the bridge".

It emerged last week that Sir Mervyn told Barclays chairman Marcus Agius that Barclay's chief executive Bob Diamond no longer had the support of regulators before he quit. But MPs have accused Mr Diamond of being "less than candid" after he played down the fraught relationship between the bank and regulators in recent months. Mr Diamond is now facing calls to reappear before the cross-party committee.

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