Barclays Was 'In Denial' Over Rate-Fixing
The Bank of England governor has accused the board of Barclays of being 'in denial' over regulatory concerns about the bank.
Speaking to MPs at the Treasury Select Committee (TSC), Sir Mervyn King also said he learned about illegal activity in Libor rate-setting by Barclays only two weeks ago.
Sir Mervyn said there were "genuine and deep" concerns among regulators over governance and a loss of confidence in the bank's bosses.
Barclays was fined £290m by US and UK regulators last month over manipulation of the inter-bank lending rate, known as Libor.
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 just weeks ago.
An internal investigation by Barclays - said to cost close to £100m - involved reviewing 22 million documents and emails, listening to one million audio recordings and interviewing dozens of people.
The Bank of England (BOE) boss' comments come after news last week that Sir Mervyn discussed concerns over Libor with the-then New York Federal Reserve president Timothy Geithner at least four years ago, raising questions over why the Bank of England 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."
In a somewhat tetchy exchange, TSC members also quizzed BOE deputy governor Paul Tucker, its executive director of markets Paul Fisher and Financial Services Authority (FSA) boss Lord Turner.
The committee asked 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".
Sir Mervyn came into the debate and added: "At no stage had the New York Fed raised concerns with the Bank that they had seen wrong-doing."
Explaining his role in Barclays chief executive Bob Diamond's departure, the governor said: "I decided the proper thing for me to do was to have a conversation with the chairman and an independent director.
"I made it clear I was not speaking for the Government or the Chancellor and I was not speaking on behalf of the FSA.
"I wanted the chairman to be very conscious of the concerns the regulators had raised.
"When I met them, the two of them, they had not taken on board the loss of confidence the regulators had with Barclays."
He added: "The question was left with them. I wanted to make clear to the board that the regulators have these concerns. I didn't know what the outcome would be."
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".
He added later: "No one believed the culture was set by the chairman but by the chief executive.
"Barclays was once a great bank. It has to create a new bank with a new culture."
It emerged last week that Sir Mervyn told Barclays chairman Marcus Agius that Mr 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, whose previous evidence appeared at odds with that of colleague Jerry del Missier, is now facing calls to reappear before the cross-party committee.