Barclays Rating Outlook Downgraded to ‘Negative’

Posted July 5th, 2012 at 4:30 pm (UTC-5)
Leave a comment

Two leading credit rating agencies have downgraded Britain's Barclays bank in the aftermath of an interest rate rigging scandal that cost its chairman and two top executives their jobs.

Both Moody's Investors Service and Standard & Poor's on Thursday changed their outlook of the bank's financial stability from “stable” to “negative.”

The financial services firms said they based their decisions on the resignation of Chief Executive Robert Diamond and two other senior bank officials, and uncertainty about the new management team. Barklays announced Diamond's resignation Tuesday.

Barclays last week agreed to pay $453 million to settle British and U.S. claims that the bank manipulated what is known as the London interbank offer rate — or Libor. It is a key lending benchmark on which interest rates are calculated on trillions of dollars of loans for consumers and businesses throughout the world.

Diamond who has built Barklays Capital, the firm's investment arm, sought to defend the troubled bank before lawmakers Wednesday.

“I love Barclays, I love Barclays because of the people. That is being put on Barclays in a way that is not representative of the firm that I love so much.''

But former Financial Service Secretary Paul Myners said Diamond had not acted as a steward of the investment branch “in the way that regulators would have expected.” He said Britain needs a judge-led inquiry into its banking sector.

“I don't think we know why an industry and a profession that was held in high regard for trust, integrity and prudence 30 or 40 years ago ended up where it is now. I think we do need to understand that.''

Moody's said pressure on Barklays bank could force it to move away from investment banking.