Barclays's Agius Is Stepping Down

By SARA SCHAEFER MUÑOZ

LONDON—The chairman of Barclays PLC, Marcus Agius, will step down amid fallout from the bank's $453 million settlement of an interest-rate manipulation probe, according to three people close to the bank.

Barclays Settlement with the FSA

Barclays said it will pay $453.6 million to settle a long-running probe by U.S. and U.K. regulators into allegations that traders manipulated interbank lending rates. Explore the bank's settlement with the U.K.'s FSA.

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Political and investor pressure has mounted on the management of U.K.-based Barclays since the settlement was announced Wednesday. The announcement of Mr. Agius's departure could come as soon as Monday, said one of the people.

Mr. Agius, 65 years old, a British-Maltese banker who formerly worked at Lazard Ltd., has led the bank since 2007, steering Barclays through the 2008 financial crisis and avoiding the direct state bailouts that were needed by many of its global peers.

But Barclays has faced a number of problems more recently, including a sweeping investigation by U.S., U.K. and Asian authorities of several global banks into alleged wrongdoing in the interest-rate-setting process that influences a benchmark lending rate, the London Interbank Offered Rate, or Libor.

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Reuters

Marcus Agius is expected to resign as Barclays chairman on Monday.

Barclays was the first among a group of global banks being investigated to reach a settlement. No banks or individuals have been charged with wrongdoing.

Banks that have disclosed they are being investigated include Citigroup Inc., Deutsche Bank AG, HSBC Holdings PLC, J.P. Morgan Chase & Co. and Royal Bank of Scotland Group PLC. Swiss bank UBS AG has said it has been granted partial immunity by certain regulators, including the Justice Department, in return for cooperating with the probe.

In the settlement with the U.K.'s Financial Services Authority, the U.S. Commodity Futures Trading Commission and the U.S. Department of Justice's fraud section, Barclays admitted that executives and traders tried to manipulate this interest rate.

Libor rates are calculated for different currencies each day under the auspices of the British Bankers' Association using quotes submitted by banks on a panel, based on the banks' estimated borrowing costs. More than $800 trillion in securities and loans are linked to the Libor, including $350 trillion in swaps and $10 trillion in loans, including auto and home loans, according to the CFTC. Even small movements—or inaccuracies— in Libor affect investment returns and borrowing costs, for individuals, companies and professional investors.

The settlement comes as investors in recent quarters have become displeased with the bank's high pay for its executives and its low returns, especially after an ambitious effort to expand its investment bank fell short of expectations. Along with other U.K. banks, it has been involved in the widespread mis-selling of payment-protection insurance.

The bank also has been accused by U.K. authorities of avoiding tax, a misdemeanour that could cost it £500 million ($785.2 million). Barclays said it hasn't done anything wrong.

In addition to likely costing Mr. Agius his job, the Libor settlement put the bank's chief executive, Robert Diamond, in the spotlight, with speculation last week that the scandal could force him to be the one to step down. But Mr. Diamond, 60, appears to have dodged that bullet.

Mr. Diamond and other top executives met last week with Barclays board, and agreed to forgo their multi-million pound bonuses in hopes of blunting criticism of the bank's actions.

But the bonus sacrifice didn't satisfy politicians and some shareholders, and Prime Minister David Cameron vowed to launch an independent investigation on how the rate is set.

"It's very important [the review] takes all of the actions necessary, holding bankers accountable... making sure there's proper transparency, making sure the criminal law can go wherever it needs to uncover wrongdoing," he told BBC television Saturday.

Labour opposition leader Ed Miliband called for a criminal prosecution relating to the attempted rate-manipulation, and Mr. Diamond will appear before a Parliamentary panel to answer questions.

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Bloomberg News

Barclays Chief Executive Robert Diamond seems to have dodged bullet.

Mr. Agius is at the center of the Libor scandal, acting as both chairman of Barclays and the BBA, the trade body the oversees the benchmark.

He has been a divisive figure at the BBA, clashing with Chief Executive Angela Knight, according to people familiar with the matter. Ms. Knight has been pushing for the government to have a greater oversight of the benchmark, but has faced internal resistance, these people say.

The U.K. government, along with the Financial Services Authority and the Bank of England, has been reviewing the regulation and supervision of Libor since March of this year.

Business Secretary Vince Cable said there should also be a criminal investigation into the Libor-fixing scandal.

"[The public] just can't understand why people are thrown into jail for petty theft and these guys just walk away having perpetrated what looks like conspiracy," Mr. Cable told Sky television Sunday.

Bank of England Gov. Mervyn King on Friday called for the current system for calculating Libor to be scrapped.

Mr. King said the process of using quotes to calculate Libor should be replaced with a system in which actual transaction prices are used instead. "The idea that my word is my Libor is dead," he said.

In the settlement agreement, the CFTC said there were two areas of unlawful conduct by Barclays. The first concerned senior management, the regulator said. In late 2007, as banks came under pressure in the early rumblings of the financial crisis, Barclays managers didn't want the bank to be seen to be paying high rates to borrow, it said. After discussions "among high levels of management" within the bank, an order was sent to keep Barclays' submissions to U.S. dollar Libor at an artificially low level, the CFTC said.

"Barclays Libor submitters were told not to submit [quotes for U.S. Libor] at levels where Barclays was 'sticking its head above the parapet,'" the CFTC said. "Multiple" senior managers at the bank were involved, according to a CFTC official. People familiar with the matter say the majority of Barclays employees involved in the alleged manipulation have left the bank.

The CFTC also said Barclays traders in New York, London and Tokyo attempted to manipulate Libor to help their derivatives trading positions. Traders made unlawful requests to the bank's rate submitters "routinely, and sometimes daily" from at least mid-2005 to at least the fall of 2007, the CFTC said. The requests were frequently accepted by the bank's rate submitters, according to the CFTC. It quoted emails such as "always happy to help" and "Done...for you big boy."

A version of this article appeared July 2, 2012, on page C1 in the U.S. edition of The Wall Street Journal, with the headline: Barclays Fallout Hits Chairman.