Former Barclays chief Bob Diamond faced some tough questions about the interest rate-fixing scandal from the Treasury committee today in parliament.
Diamond resigned from his post as chief executive yesterday, after enduring public and political pressure over the bank’s supposed manipulation of the Libor rate – the estimated average interest rate that leading banks in London would be charged if borrowing from other banks.
Speaking in front of the committee, Diamond labelled the roles of some Barclays employees in the scandal as “reprehensible”, but was tripped up a couple of times when asked about his knowledge of the Libor manipulation.
Dissatisfaction with the high street banks is driving people to take action – George Blunden, Charity Bank
He claimed that he only found out about it “this month” – something that Barclays’ 2011 Annual Report, which was released in March this year, suggests otherwise. It mentions “investigations” into rate-fixing allegations, and is signed off by Diamond himself.
On a number of occasions throughout the questioning, including in his opening gambit, Diamond relayed his “love” for Barclays.
“I love Barclays, that’s where it starts”, he began. “I love Barclays because of the people.”
But given the fact that last year, he cashed in the biggest cheque out of all FTSE 100 chiefs – a cushy £21m to be precise – this is somewhat unsurprising. He went on to describe how he felt “physically ill” when he learnt about the rate-manipulation.
“I’d say that we’re in danger of getting distracted by personalities and missing the point that the entire banking system is fundamentally broken”, he said.
“Manipulating interest rates is one thing, but the thing we should really be worried about is the fact that the bulk of the money supply is on loan from banks, because 97% of money is created by banks when they make loans.
“This is the root of the huge personal debts that people have and it’s also why banking has been such a hugely profitable industry for so many years.”
But the public are fighting back. According to figures released by two of the UK’s leading ethical banks, the recent sustained uncertainty and scandal in the banking sector has spawned a natural surge in interest in the ethical options.
We reported this morning how Triodos Bank had witnessed a 51% surge in account applications last week, and on Monday, opened three times as many accounts compared to an average day.
This past week has destroyed consumers’ trust, not only in the banks but also in the establishment tasked with protecting the public interest – Louis Brooke, Move Your Money
On top of this, Charity Bank welcomed 440 new customers between January 1 and June 30 this year – a figure 300 more than the same period in 2011. More recently, visitors to Charity Bank’s website, and the number of savings account enquiries doubled in the past week.
“Dissatisfaction with the high street banks is driving people to take action”, explained George Blunden, chairman of Charity Bank.
“Ordinary members of the public are beginning to realise that there is an alternative to depositing their savings in commercial banks, where they will have no idea what use their money is put to.”
Triodos and Charity Bank are just two of a number of ethical or sustainable options for individuals in the UK.
It was recently revealed that financial institutions that focused their business around values were outperforming those that had a primary aim of increasing capital.
The study, called Strong, Straightforward and Sustainable Banking was conducted by the Global Alliance for Banking on Values, and compared the performance of 17 “values-driven” banks with 29 of the largest, most influential mainstream ones. It concluded that the more ethical institutions delivered better returns than the high street behemoths.
“This banking scandal is swiftly turning into a political crisis”, commented Louis Brooke, spokesperson for Move Your Money, a national campaign aimed at encouraging people to switch to ethical banks.
“This past week has destroyed consumers’ trust, not only in the banks but also in the establishment tasked with protecting the public interest.
“The concentration of wealth and power in four big banks has been bad for customers, bad for business and bad for Britain.
“It has also had a corrosive effect on the entire political establishment who have been compelled to go to any lengths to prop up the too big to fail banks irrespective of how depraved their behaviour has become.
“Politicians seem intent on point scoring rather than finding a meaningful solution to our broken banking system. That’s why the public are taking matters into their own hands and moving their money”.
Stay tuned for Blue & Green Tomorrow’s latest in-depth report, called The Guide to Sustainable Banking, which is set for release later this month.