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Agius resigns as Barclays chairman

by Laura Board in London | Published July 2, 2012 at 9:29 AM

Barclays plc chairman Marcus Agius stepped down Monday, July 2, becoming the first high-profile victim of an interest-rate rigging scandal which last week cost the London institution $450 million in settlements to U.S. and U.K. authorities.

Acknowledging that the scandal has dealt a "devastating blow" to Barclays' reputation, Agius, 65, said: "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."

Agius' departure ends his reign as the last chairman at a top four U.K. bank to predate the financial crisis. Nonexecutive director John Sunderland, 66, will lead the hunt for Agius' successor, with Agius remaining in place until the vacancy is filled and senior independent director Michael Rake, 64, becoming deputy chairman. Rake is currently chairman of BT Group plc and EasyJet Group plc and is seen as a potential replacement for Agius as chairman.

Agius said Barclays will also conduct an audit into its business practices led by an independent third party and reporting to Sunderland, the former chairman of Cadbury plc, and other nonexecutive directors.

"It has been my privilege to serve as Barclays chairman for the past six years," Agius said. "This has been a period of unprecedented stress and turmoil for the banking industry in particular and for the wider world economy in general," noting that Barclays is a "strong, well capitalised and profitable business,"

Barclays last week became the first institution to settle the LIBOR fraud investigation, which involves an unknown number of other banks. The development prompted sharp falls in the share prices of Barclays and its peers and unleashed a fresh wave of recrimination from British politicians and regulators, who had only recently agreed to water down some of the toughest reforms proposed by a government-led commission on the sector after furious lobbying from institutions.

British banks' problems were exacerbated Friday when the Financial Services Authority found that four institutions had sold insurance for small businesses inappropriately. The regulator ordered the lenders to pay compensation. The two developments increase the prospects of additional reforms of an industry already caught in a maelstrom of regulatory change emanating from domestic and international authorities. As a starting point, Prime Minister David Cameron has called for a review of how LIBOR rates are set.

Shareholders reacted positively to Agius' resignation and the audit he announced, marking Barclays shares up 5.5% to 171.8 pence by mid-morning in London. At that price the bank has a market value of £21.1 billion ($33.1 billion).

Some investors have also called for the resignation of CEO Bob Diamond, a 16-year-veteran of Barclays who last year came under heavy fire for his pay packet. Diamond, 60, ran Barclays' investment bank, the unit responsible for the LIBOR fraud committed from 2005 to around 2008 , before becoming CEO in April 2011. Last week Diamond said he and three other senior Barclays executives would forgo their 2012 bonuses because of the fraud.

Analysts disagree on the risk to Barclays of further woes arising from the LIBOR fraud settlement.

Investec Ltd. analyst Ian Gordon, a buyer of Barclays, argued Monday that the argument Barclays may have to pay mammoth sums to settle future litigation is overstated.

"We urge investors to back Bob, and take full advantage of Barclays' recent share price underperformance," Gordon wrote.

However, Oriel Securities Ltd. analysts Mike Trippitt and Vivek Raja on Friday downgraded Barclays to hold from buy, and on Monday took the same action on Royal Bank of Scotland Group plc, another of the banks being investigated for LIBOR fraud. They predicted that both banks "will remain value traps for prolonged periods."

A committee of U.K. lawmakers has summoned Diamond to appear before it for further questioning on Wednesday, with Agius following on Thursday.

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