Bob Diamond To Get Rough Ride From MPs

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Bob Diamond is expected to come out fighting in a showdown with MPs (BSE: MPSLTD.BO - news) , following his surprise resignation as Barclays (LSE: BARC.L - news) chief executive in the wake of the rate-rigging scandal.

Mr Diamond and his right-hand man Jerry del Missier both quit with immediate effect as the storm surrounding the Libor fixing dragged in the Bank of England.

The multimillionaire former Barclays head is due to face the powerful Treasury select committee.

At his appearance before the committee of MPs, chaired by the Tory Andrew Tyrie - also expected to lead a parliamentary inquiry into banking - the former boss will attempt to account for the sequence of events between 2005 and 2009, when the bank tried to fix the London interbank offered rate (Libor) in its favour.

On Tuesday Mr Diamond implicated the Bank of England in the scandal by revealing details of a phonecall he had had with BoE deputy governor Paul Tucker that ultimately led to some staff attempting to fix the Libor.

Barclays said Mr Diamond's account of the conversation was wrongly interpreted by Mr del Missier, then a senior manager at investment arm Barclays Capital, as an instruction to lower the bank's Libor submissions.

Marcus Agius, the former chairman who resigned over the affair on Monday, refused to comment on a report that this happened because Barclays was told in October 2008 by the deputy governor of the Bank of England Paul Tucker that Barclays did not have to submit its Libor rates as high as it had done.

But MPs may see this revelation as an attempt by Mr Diamond and Barclays to draw attention away from the bank's attempts to fix the Libor in its favour from 2005 onwards.

A submission from the bank to the committee before Mr Diamond's appearance denies that senior management had any knowledge of attempts to manipulate the Libor, saying no-one above desk supervisor level had any idea what was going on.

In an interview with Sky's Jeff Randall, Mr Agius said Mr Diamond's resignation came after the "elastic snapped".

On Monday, Mr Diamond had told staff that he had no intention of leaving his post - saying it was his responsibility to restore the bank's reputation.

Mr Agius had already resigned to try to take the flack off the Barclays boss - a move that had precisely the oppposite effect.

But it is understood Mr Diamond changed his mind on Monday night following a conversation involving Mr Agius and the bank's deputy chairman Sir Michael Rake over the intense political pressure on Barclays.

In a bizarre turn of events, Mr Agius has been temporarily reinstated to the role he resigned from just one day earlier to lead the search for Mr Diamond's successor.

Mr Agius has admitted to knowing about the Libor-fixing attempts for two years as the Financial Service Authority and other agencies investigated the bank's actions.

George Osborne, who is pushing for the parliamentary probe into banking standards, said Mr Diamond had made the "right decision" for the bank and for the country.

The Treasury launched a consultation on the possibility of introducing a new criminal offence covering serious misconduct in bank management.

Ed Miliband backed Mr Diamond's departure, but continued to call for a full judicial inquiry into banking culture and accused the PM of failing to recognise "the gravity and scale of this crisis".

On Thursday, MPs will vote whether to set up a parliamentary inquiry into the banking scandal, as proposed by the Chancellor, or to set up a judge-led inquiry, similar to the Leveson inquiry into media standards, as proposed by Labour.

Ed Miliband is almost certain to lose the vote as the Lib Dems are expected to support the Conservatives.

Labour will then have to decide whether to co-operate with a cross-party parliamentary inquiry or refuse to take part.

Mr Diamond will reportedly be asked to give up nearly £20m in unvested shares awarded to him in previous years.

It is estimated that he has earned £120m since joining Barclays' board in 2005.

The 60-year-old former bank boss, who took home nearly £18m in pay rewards in 2011, is expected to "speak more freely" when he appears before the committe now he is no longer in charge.

Barclays has submitted a copy of a note, sent from Mr Diamond on 30 October 2008 to Mr del Missier, and then chief executive John Varley, recounting his conversation with Paul Tucker, to the committee.

Mr Diamond said Mr Tucker had flagged concerns from senior figures in Whitehall over why Barclays was always towards the top end of Libor pricing.

Mr Diamond wrote: "His (Mr Tucker's) response was 'you have to pay what you have to pay'."

Mr Diamond said he asked Mr Tucker to explain to his Whitehall contacts that other banks were providing Libor quotes that did not represent real transactions.

The US banker then said Mr Tucker told him the bank's Libor rate did not "always" need to appear as high as it had recently.

Barclays added: "Subsequent to the call, Bob Diamond relayed the contents of the conversation to Jerry del Missier.

"Bob Diamond did not believe he received an instruction from Paul Tucker or that he gave an instruction to Jerry del Missier.

"However, Jerry del Missier concluded that an instruction had been passed down from the Bank of England not to keep Libors so high and he therefore passed down a direction to that effect to the submitters."

Barclays said there was no allegation by the authorities that this instruction was intended to manipulate the ultimate rate and the bank's submissions had consistently been excluded from the final Libor calculation.

The FSA investigated Jerry del Missier personally in relation to these events and closed the investigation without taking any enforcement action, Barclays added.

Mr Diamond, who was once dubbed the "unacceptable face of banking" by Peter Mandelson, remained defiant in his resignation statement.

"I am deeply disappointed that the impression created by the events announced last week about what Barclays and its people stand for could not be further from the truth," he said.

He added: "My motivation has always been to do what I believed to be in the best interests of Barclays. No decision over that period was as hard as the one that I make now to stand down as chief executive.

"The external pressure placed on Barclays has reached a level that risks damaging the franchise - I cannot let that happen."

Earlier, Barclays said Mr Diamond's severance pay package is "still under discussion".

The bank's most recent remuneration report, for 2011, said executive directors are entitled to a notice period of 12 months and payment in lieu of notice in instalments.

This means Mr Diamond could be entitled to a full year's salary, which in 2011 was worth at least £1.4m.