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Libor Scandal Did 'Great Damage' To UK

(c) Sky News 2012

A withering attack has been launched by an influential group of MPs (BSE: MPSLTD.BO - news) on Barclays Bank (NYSE: BCS-PA - news) and its former boss Bob Diamond, in the wake of the Libor rate-fixing scandal.

The commons Treasury Select Committee says, in a report out today, that the scandal has done great damage to the UK's reputation, reducing public trust in banks to an all-time low.

And it accused Mr Diamond of being "highly selective" in his evidence to it.

"Select committees are entitled to expect candour and frankness from witnesses before them," the report says.

It continues: "Mr Diamond's evidence, at times highly selective, fell well short of the standard that Parliament expects, particularly from such an experienced and senior witness."

And committee members concluded that the problems at Barclays (LSE: BARC.L - news) went far beyond the manipulation of the inter-bank lending rate, for which it was fined almost £60m in June.

"Such misconduct," it said, "is a sign of a culture on the trading floor, and higher up, that had gone badly awry."

The report clears the Bank of England of complicity in Barclay's illegal activity, but it criticises both it and the Financial Services Authority for failing to spot what was going on.

It also calls for action in a number of areas, including:

·      Higher fines for firms that fail to co-operate with regulators.

·      A fresh look at possible gaps in the criminal law. 

·      And a much stronger governance framework at the Bank of England.

The Labour opposition too is urging the government to step in with tougher laws.

Shadow Treasury Minister Chris Leslie said: "With Libor issues compounded by other recent allegations involving other UK banks, the Chancellor needs to get serious.

"Which is why a comprehensive and independent inquiry was always our preference."

But the Treasury is insisting that all necessary action will be taken.

"The manipulation of key global benchmark rates has been another example of a culture of irresponsibility within the banking system, which the Government is determined to fix as quickly as possible," it said in a statement.

And, in an attempt to limit damage inflicted by the Select Committee, a Barclays spokesman said: "We will carefully consider this comprehensive report.

"While we don't expect to agree with every finding in it, we recognise that change is required, not least to restore stakeholder trust."

However, today's report is only a beginning. The committee's chairman, Conservative MP Andrew Tyrie, will now head a full Parliamentary Commission on banking standards.

And, it is suggested, this should look at how a particular chief executive could block internal challenges and expose a bank to strategic errors.

The tone, then, of this high-powered investigation is set.  And it will be some time before Barclays, Mr Diamond and other top bankers can expect release from the pillory.  

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