April 1, 2023

DealBook: Marcus Agius, Chairman of Barclays, Resigns

Marcus Agius, the board chairman, has been a focus of investor dissatisfaction.Dylan Martinez/ReutersMarcus Agius, the board chairman, has been a focus of investor dissatisfaction.

2:36 a.m. | Updated

LONDON — Marcus Agius, the chairman of Barclays, resigned on Monday, less than a week after the big British bank agreed to pay $450 million to settle accusations that it had tried to manipulate key interest rates to benefit its own bottom line.

The resignation comes as Barclays tries to limit fallout from the case, which is part of a broad investigation into how big banks set certain rates that affect borrowing costs for consumers and companies. Since striking a deal with American and British authorities last Wednesday, the Barclays management team has faced increasing pressure from politicians and shareholders to take action.

“Last week’s events have dealt a devastating blow to Barclays’ reputation,” Mr. Agius said in a statement. “As chairman, I am the ultimate guardian of the bank’s reputation. Accordingly, the buck stops with me and I must acknowledge responsibility by standing aside.”

Mr. Agius, the first casualty, will remain as chairman until a successor has been found. Michael Rake, a senior independent director on the Barclays board and a former chairman of the accounting firm KPMG, has been appointed deputy chairman, according to a statement from the bank.

Barclays also announced on Monday that it will conduct an independent audit of its business practices. The review will center on what led to the rate manipulation and how the issues will affect the bank’s business units in the future. The audit will be used to create new code of conduct for Barclays.

As head of the the British bank’s board, Mr. Agius has been a focus of investor dissatisfaction in recent years.

Shareholders balked at his decision to take capital from Mideast investors during the financial crisis, concerned that the deal did not protect the rights of existing investors. The board has also been criticized for signing off on the multimillion-dollar pay packages of the chief executive, Robert E. Diamond Jr., and other executives, as well as for the lackluster performance of the bank’s shares.

Now Mr. Agius is being held to account for the rate-manipulation scandal that took place under his watch.

A former banker at Lazard, Mr. Agius joined the Barclays board in 2006 and became its chairman in 2007. He is also the honorary chairman of the British Bankers’ Association, the organization that oversees one of the key rates in question, the London interbank offered rate, or Libor. It is unclear whether he will remain in that role after his departure from Barclays.

With the resignation of Mr. Agius, Barclays may be trying to deflect some of the attention away from Mr. Diamond, who ran Barclays’ investment bank during a period when authorities found wrongdoing by traders. Mr. Diamond has come under scrutiny from British politicians, and some have called for him to step down.

While he has dismissed those calls, Mr. Diamond has apologized for the bank’s missteps, saying the behavior was “wholly inappropriate.”

“This kind of conduct has no place in the culture of Barclays,” Mr. Diamond said in a letter to British politicians last week. He and other executives have also agreed to give up their bonuses this year.

Mr. Diamond will be in the line of fire on Wednesday, when he is scheduled to testify before Parliament. Local politicians are expected to question him about the actions within the bank that led to the multimillion-dollar fines from the Justice Department and the Commodity Futures Trading Commission in the United States and the Financial Services Authority in Britain.

“The public’s trust in banks has been even further eroded,” Andrew Tyrie, chairman of the British Parliament’s treasury select committee, said in a statement. “Parliament and the public need to know what went wrong and whether the perpetrators have been rooted out.”

The British government will also start an inquiry this week into a key rate at the center of regulators wide-ranging inquiry.

The rate, Libor, is currently set based on submissions from a number of the world’s largest banks about how much it would cost them to raise money in the capital markets. Such benchmarks are used to help determine the borrowing costs for $750 trillion worth of financial products, including mortgages, credit cards and student loans. The review of Libor is expected to be completed by the end of August.

The integrity of Libor and other key rates have come into question as a result of the multiyear investigation by regulators. A number of banks are under scrutiny, including HSBC, JPMorgan Chase and Citigroup.

In the Barclays settlement, regulators released evidence of what they called “pervasive” wrongdoing by the bank over four years that was aimed at improving its results.

Authorities found that employees in the bank’s treasury department, which helped set Libor, submitted artificially low figures at the request of the firm’s traders, who profited from buying and selling financial products. The two sides are supposed to be divided by so-called Chinese walls to ensure that confidential information is not improperly shared to make profits.

But e-mails showed that the two divisions regularly collaborated in an effort to bolster their profits and avoid scrutiny about the bank’s health at the height of the financial crisis. In part, Barclays wanted to keep its rates in line with those of rivals to keep its “ ‘head below the parapet,’ so that it did not get ‘shot off,’ ” according to regulators.

Mark Scott reported from London and Michael J. de la Merced from New York.

Article source: http://dealbook.nytimes.com/2012/07/01/chairman-of-barclays-is-expected-to-resign/?partner=rss&emc=rss

Germany and France Near Deal to Recapitalize Banks

“We are determined to do everything necessary to ensure the recapitalization of Europe’s banks,” Chancellor Angela Merkel said in Berlin after meeting with President Nicolas Sarkozy of France.

But beyond promising closer coordination of economic policies for the euro zone, the two leaders declined to provide specifics on how the recapitalization would work, or how much money they would commit. The continued uncertainty could unnerve investors who hoped to see the governments take more decisive action.

The announcement came on the same day that the governments of France, Belgium and Luxembourg agreed to nationalize Dexia, Belgium’s biggest bank, infusing it with billions of euros in taxpayer money after it became the first casualty of the Greek sovereign debt crisis. Government officials had raced to prop up Dexia before global financial markets opened on Monday.

Dexia, which had received a bailout in 2008, “is the biggest euro zone bank failure in quite some time,” said Peter Zeihan, vice president of analysis at Stratfor, a geopolitical risk analysis company based in Austin, Tex. “It will force investors and shareholders to take second look at what they thought was stable.”

Banks like Dexia have become a flashpoint for European governments as they try to rein in the region’s debt woes without worsening their own finances. Mrs. Merkel, Mr. Sarkozy and others have only recently conceded that European banks may not be as sheltered from the storm as first thought, especially if the sovereign debt situation ensnares larger countries.

If that were to happen, other banks in Europe and the United States — as well as the governments themselves — could come under further pressure.

But Europe’s leaders remain at odds on how to achieve their goals, including the best way to shore up bank finances.

France, for example, wants to pump money from a developing bailout mechanism, the European Financial Stability Facility, into the banks, while Germany insists that the fund should be used only as a last resort, if the banks are not able to raise more money on their own.

The International Monetary Fund has estimated that Europe’s banks may need up to 300 billion euros, or about $400 billion, more capital if the debt crisis widens.

On Sunday, neither Mrs. Merkel nor Mr. Sarkozy put forth their own figure, saying they needed to consult with other European leaders. But Mrs. Merkel emphasized that European leaders would do “everything necessary” during a series of upcoming meetings, including one involving the 27 European Union leaders this week.

The bailout of Dexia comes as both governments are trying to pay down their own countries’ deficits and debts. In France, some officials have sounded the alarm that too big of a bailout for Dexia could menace the nation’s sterling debt rating, a notion the finance minister, Francois Baroin, has been quick to dismiss.

Belgium is in a more difficult situation. Its debt is 97.2 percent of gross domestic product, the third highest in the euro zone, after Greece and Italy. Moody’s Investors Service on Friday warned it could downgrade Belgium’s rating if support of Dexia lifted Belgium’s debt and investors started pushing up its borrowing costs. Officials say the bailout of 4 billion euros would not raise its debt much higher.

It was the second bailout in three years for Dexia, a lender to European and American cities that got into trouble in 2008 after a huge portfolio of subprime loans it owned went sour. Dexia received billions of euros from France and Belgium, and was the biggest European recipient of loans from the Federal Reserve’s discount window at the time.

Dexia, which has global credit exposure of about $700 billion, plans to create a so-called bad bank to house its troubled assets, including billions of euros’ worth of Greek, Italian, Portuguese and Irish debt. On Sunday night, the governments were still haggling over how to split the bill.

France gave Belgium approval to buy up to 100 percent of Dexia’s Belgian consumer bank, Bloomberg News reported. Dexia’s French municipal financing arm would be split from the group and merged with the French state bank Caisse des Dépôts and the banking arm of the French postal service, Banque Postale.

Dexia had almost recovered from its previous stumble when its troubles flared anew in recent weeks. Indeed, just three months ago, Dexia passed a round of stress tests for European banks, although regulators last week ordered a review of those tests to account for a lower value of government debt.

This month, banks rapidly started pulling back on lending to Dexia, and Moody’s placed the bank on review for a downgrade.

Last week, Dexia’s stock price plunged 42 percent and, as it neared collapse, trading in its shares was halted on Thursday.

Dexia’s fortunes, and those of many European banks, remain tethered to what happens to Greece. Germany’s finance minister, Wolfgang Schäuble, said in an interview with the Sunday edition of the Frankfurter Allgemeine Zeitung “that we assumed in July a level of debt reduction that was too low” for Greece, implying Greece faced difficulties ahead and even more support.

Mrs. Merkel, now increasingly concerned about any run on the banking system, told finance ministers and leaders from the World Bank and the I.M.F. last week in Berlin that Germany supported a coordinated bank recapitalization program.

Mrs. Merkel does not want to funnel more taxpayer money to the banks before they try going to the markets to raise capital. But she acknowledged in recent meetings in Berlin with World Bank and I.M.F. officials that Germany would not hold back in bolstering the banks if necessary. Failure to do so, she said, would lead to “vastly higher damage.”

Article source: http://feeds.nytimes.com/click.phdo?i=866fcc53d06b777597e605f15661f916