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Bob Diamond:
I quit after becoming
‘lightning rod’
People & Markets Ex-Barclays man says BoE was unfairBY STEVE SLATERFormer BARCLAYS boss Bob
Diamond said he considered
lGHTINGûTHEû"ANKûOFû%NGLANDû
when it said he needed to resign
in 2012, but opted not to
because he had become “a
lightning rod” for the bank’s
troubles.
When the Libor rigging
SCANDALûERUPTEDûATû"ARCLAYSûINû
June 2012 it prompted Mervyn
King, then governor of the
"ANKûOFû%NGLAND ûTOûAPPLYû
PRESSUREûONû"ARCLAYSûCHAIRMANû
Marcus Agius to force
Diamond out. Agius visited
Diamond in early July to tell
him the governor had lost
CONlDENCEûINûHIMûANDûWANTEDû
him to resign.
“It was the most challenging
professional decision I’ve ever
had to make,” Diamond
recalled at an event last week.
He considered asking the
"ARCLAYSûBOARDûTOûSUPPORTûHIMû
because he felt the governor’s
request was “not the right
decision” based on how he had
behaved and was leading the
bank.
“I decided that evening not to
[ask the board to support me]. I
had to admit I had become a
lightning rod. I didn’t like that,
it didn’t feel like me. I didn’t feel
it was appropriate and I didn’t
feel it was fair.”
Diamond was speaking at an
event with Philip Augar, the
author of a new book on
"ARCLAYSûRECENTûHISTORY û
including Diamond’s role in
building its investment
bank from 1996. That included
its purchase of parts of
,EHMANû"ROTHERSûINû ûBUTû
also a series of misconduct
problems.SECRET £62BN LOAN
"ARCLAYSûWASûTHEûlRSTûBANKûTOûBEû
lNEDûFORûMANIPULATINGû,IBORû
benchmark interest rates, and
although rivals were
SUBSEQUENTLYûlNEDûFARûHIGHERû
amounts, the scandal hit
"ARCLAYSûHARDER
A report into Libor
manipulation by UK lawmakers
in August 2012 said Diamond
could be excused from the charge
of “deliberate wrongdoing” but
other senior managers were
issuing instructions to manipulate
the bank’s submissions from
September 2007 and during 2008.
Diamond said last week the
context of the time was
important. He said UK regulators
KNEWû"ARCLAYSû,IBORûRATESûWEREû
being looked at when they
approved him to take over as
CEO at the start of 2011, while
2OYALû"ANKûOFû3COTLANDûANDû
("/3ûWEREûPOSTINGûLOWERû,IBORû
levels even though they were
receiving secret support from
THEû"ANKûOFû%NGLAND
“In the latter parts of 2008,
keep in mind there was a £62bn
SECRETûLOANûTOû("/3ûANDû2"3û)û
didn’t know about it, none of
YOUûKNEWûABOUTûITû4HEû"ANKûOFû
England knew about it,”
Diamond said.
“And yet if you go back and
look at the records, while
they had that secret loan they
were posting Libor levels ...
LOWERûTHANû"ARCLAYSûANDû
lower than other banks.
[They were] saying they could
get money more cheaply when
in fact the only money they
could get was from the
government.”
2"3ûANDû,LOYDSû"ANKINGû
'ROUP ûWHICHûBOUGHTû("/3 û
WEREûLATERûlNEDûFORûmanipulating Libor rates. (^)
a leading US institutional
investor said.
In a further cautionary tale, a
€622m equivalent deal for
Norwegian satellite navigation
group MARLINK was pulled last
week. The term loans were
offered at 425bp–450bp over
%URIBOR,IBORûWITHûAûûmOORû
and 99.5 discount by JP Morgan
alongside BNP Paribas, Credit
Agricole, DNB and HSBC.
Unusually, the opportunistic
dividend recapitalisation and
RElNANCINGûDEALûWASûNOTû
underwritten and was being
SOLDûONûAûBESTûEFFORTSûBASISû"UTû
THEûBANKSûDIDûNOTûlNDûENOUGHû
appetite from investors despite
several attempts to adjust
pricing.
Investors said that sponsor
Apax had been too aggressive
about trying to take out a big
chunk of equity at a time when
there had been uncertainties in
Marlink’s underlying business
due to increased competition.
“This was best efforts, maybe
that’s why they pushed it too far
- they weren’t on the hook for
IT ûBUTûITûDIDNTûmY vûAûTHIRDû
investor said.
Investors are, however,
viewing the market as more
constructive and generally like
low secondary prices, which
offer interesting relative value
dynamics and the ability to
trade both markets. The
current repricing is being
compared to a similar
adjustment in 2016 after oil
prices slumped.
“It’s good. It just means
there’s more choice of primary,
or secondary at lower levels. It’s
a good thing and a healthy
development,” a fourth investor
said.
The ability to adjust is also
being cited as evidence of a
more mature market, as
investors continue to focus on
credit and push banks and
PRIVATEûEQUITYûlRMSûFORûMOREû
CONCESSIONSûTOûBETTERûREmECTû
risk, although this could lead to
a nervous autumn for arrangers.
“It depends how aggressive
THEûBANKSûGOTûWITHûmEXû
economics and how sensible the
sponsors are on a proper
document. If banks lose
economics because they’ve been
too aggressive on what they’ve
underwritten that’s OK – I’m
not going to lose sleep about it.
$ONTûBEûGREEDYvûTHEûlRSTûinvestor said. (^)
been with the bank for 36 years,
the last 12 as chairman and CEO.
“When I’ve been asked about
succession in the past, it’s always
been hard for me to imagine
leaving. When times are tougher,
you can’t leave. And, when times
are better, you don’t want to leave.
“Today, I don’t want to retire
from Goldman Sachs, but by my
own perhaps convoluted logic, it
feels like the right time,” he said.
NEW DIRECTION
Solomon’s background in capital
markets, M&A, debt capital
markets and lending operations,
helped him secure the top job.
“The board has been engaged in
a multi-year succession process,
ANDûWEûAREûCONlDENTûTHATû
3OLOMONûWILLûBUILDûOFFûTHEûlRMSû
STRONGûlNANCIAL ûRISKûMANAGEMENTû
and franchise position,”
Goldman’s lead independent
director Adebayo Ogunlesi said in
a statement. “His drive, focus on
our clients and effective
management skills will be critical
STRENGTHSûASûHEûCHARTSûTHEûlRMSû
strategy in the years to come.”
For all the talk of a new
direction for Goldman with
more transparency the roll out
of Solomon as the new CEO left
a bit to be desired.
The announcement came the
same day Goldman released its
second quarter results - but neither
"LANKFEINûNORû3OLOMONûPUTûINûANû
appearance on the earnings call. It
WASûANûOPPORTUNITYûFORû"LANKFEINû
and Solomon to talk about the
lRMSûTRANSITION û-AYOûSAID
“I also think Goldman’s stock
price has suffered because we
have not heard from David
Solomon,” he said. (^)