Diamond touch lost when rate scandal erupted

Yesterday’s revelation came as Barclays confirmed Mr Diamond will get about £2m after waiving his entitlement to a potential £20m in deferred share bonuses.

Appearing in front of the Treasury Select Committee, Barclays chairman Marcus Agius said the Financial Services Authority (FSA) changed its stance on Mr Diamond’s position at the helm in the days after the rate-rigging scandal broke.

He also admitted that Barclays’ relationship with the regulator was “strained”, but denied allegations they were in “a pretty desperate state”.

MPs were told Mr Diamond had decided to voluntarily forgo his multi-million pound bonus entitlements after he quit as chief executive last week as public anger mounted.

Mr Diamond, whose severance package amounts to a year’s salary and pension cash contribution, said he hoped the agreement “will help close this chapter and allow Barclays to move forward and prosper” after the bank was fined £290m for attempting to fix the interbank borrowing rate Libor.

Prime Minister David Cameron’s official spokesman said: “I think the decision to forgo the bonus is a sign that they understand public concerns and that they understand that there is a need for a change in the culture of banks.”

Mr Agius – who also resigned, but will remain at the bank while a successor to Mr Diamond is found – revealed that Sir Mervyn called him into an emergency meeting to explain “in no uncertain terms” that the FSA believed Mr Diamond needed to go.

“The public outcry had been far greater than thought,” said Mr Agius.

He said it was clear from the meeting with Sir Mervyn that the FSA thought Mr Agius’s resignation was inadequate and that further action was necessary.

But he stressed the FSA had not given the impression Mr Diamond should resign when the bank’s Libor fixing settlement was first announced the previous week.

The cross-party committee of MPs painted a picture of a chequered history between the FSA and Barclays leading up to the rate rigging scandal.

The committee cited a letter from the FSA flagging the regulator’s concerns about “a pattern of behaviour” in which Barclays sought to gain advantage through the use of complex structures which are “at the aggressive end of interpretation of the relevant rules and regulations”.