It is a scene that has become all too familiar in banking, as the heads of some of the world's largest financial institutions appear before governments to offer mea culpas for scandals engulfing their banks.
Robert Diamond, the besieged former chief executive officer of Barclays Bank PLC, became the latest on Wednesday as he sat before British parliamentarians to apologize for the interest rate fixing scandal that has sullied the bank's name, cost him his job and shaken public confidence in the sector.
Through three hours of testimony in London, Mr. Diamond, 60, peppered his speech with regret for the actions of Barclays staff who manipulated benchmark lending rates for profit, apologizing for actions he called "reprehensible."
He said that when he learned in the past month about efforts Barclays' traders had made to falsify key data used to set rates in the 2008 financial crisis, he "felt physically ill."
"Clearly there were mistakes," Mr. Diamond told the parliamentary select committee, one day after he resigned as head of England's second-largest bank by assets.
His testimony was reminiscent of a recent appearance by another bank CEO caught in scandal – mostly for what wasn't said.
Much like last month's questioning of JPMorgan CEO Jamie Dimon in Washington about his bank's multibillion-dollar hedging loss, the officials in London heard many apologies from the former Barclays CEO. But just as Mr. Dimon's testimony in Washington ended with senators unsure about who was to blame or what exactly went wrong at JPMorgan, British MPs left Wednesday's hearing with few answers.
Alhough several MPs took the opportunity to grill Mr. Diamond for being irresponsible, greedy, or otherwise negligent, they failed to get a clear understanding about how the benchmark rate, Libor, could be so easily manipulated by the banks that help determine it. Nor did MPs come away with a sense of how big the problem may actually be.
Libor, which stands for the London interbank offered rate, measures the interest rates banks use to borrow from each other. It is based on data provided by 16 banks and changes on a daily basis, based on the cost of funding for the group. The purpose of Libor is to help form a basis for the pricing of other financial products, including more than $800-trillion of securities and loans, including everything from credit cards to corporate bonds.
Mr. Diamond suggested to the committee that the problem is bigger than Barclays, and that other banks might have run afoul.
Barclays has admitted manipulating the number in both directions, raising it before the 2008 crisis as traders sought more profits, then depressing it during the crisis to make the bank's borrowing costs appear lower and portray Barclays as more stable.
Barclays said it also artificially lowered its Libor data during the crisis when a top official with the Bank of England asked Mr. Diamond why the bank's figures seemed consistently higher than its peers, suggesting that this was unnecessary and potentially problematic. That message was passed down the chain, resulting in the Libor data being lowered within the bank.
However, Mr. Diamond argued that the problems facing Libor are "about an industry" and "not just about Barclays." His bank is merely "the first one out," he said.
The continuing investigation about Libor reporting methods – in which regulators are probing up to 20 banks, including Royal Bank of Canada – has cast a pall over the sector and raised questions about the benchmark rates the industry uses. RBC said it is co-operating with the probe.
In his testimony, Mr. Diamond offered new details about Barclays' motivation for lowering its Libor data during the crisis. Because high financing costs are an indicator of distress, he said, the bank feared it would be partially nationalized in the crisis, as were its peers Lloyds Banking Group PLC and Royal Bank of Scotland. "We were desperate," he said.