By using 'Fit and Proper' to remove Barclays' Bob Diamond, the Bank of England subjects its people to the same standard

As reported by the Telegraph,

When the [Bank of England] Governor [Mervyn King] heard that Mr Agius was to go, he demanded a meeting with the departing [Barclays] chairman at the Bank on Monday evening. 

At the summit, Sir Mervyn apparently told a stunned Mr Agius in no uncertain terms that it was Mr Diamond who was in the firing line. 

Though it was a matter for the board, Sir Mervyn said, Mr Agius left with the clear impression that the Governor believed he was talking not just for the Bank but for the FSA and the Treasury as well. 

It was also suggested that if the Barclays board did not act appropriately, the Governor would instigate a fit and proper test of his own just as soon as Mr Osborne gave him the power to do so.

Ok, let me see if I understand the standard for when a person is not 'fit and proper' to have a job in the financial services sector.  The standard appears to be the person allowed the Libor interest rate to be manipulated knowingly or unknowingly while the person was in charge.

What would happen if this same standard were applied to the senior officials at the Bank of England (presumably a financial regulator faces a much higher standard, but that is a topic for another day)?

As also reported by the Telegraph,

In 2007, [Paul] Tucker was into his fifth year as the Bank of England’s executive director for markets. Among his many responsibilities was chairing the Bank’s little-known Sterling Money Markets Liaison Group, or MMLG. 

This had been founded eight years earlier as a committee where the Bank could speak to bankers, other regulators and representatives of industry trade bodies to discuss the minutiae of the money markets. 

To the banking industry, the money markets are the sort of low-profile, relatively low-grade job that most finance professionals with designs on big bonuses and an early retirement would see as career death. Yet their work is vital to the smooth functioning of the financial system. 

[On] November [17th], a session chaired by Tucker saw several extraordinary claims made, the significance of which is only just becoming apparent. 

Paragraph 2.1 of the MMLG’s minutes for the day records: “Several group members thought that Libor [London interbank offer rate] fixings had been lower than actual traded interbank rates through the period of stress.”

To those without a background in money markets, the line would seem innocuous, but to those present it would have been a shocking, almost blasphemous claim. What the bankers were saying was that other lenders had been misrepresenting their bank’s real cost of funding. 

As all those present would have known, the interbank borrowing rates submitted by lenders daily are the basic reference point for the global financial markets measured in the hundreds of trillions of dollars. Everything from mortgages and personal loans to complex derivatives depended on Libor for their price. 

The suggestion that some banks could be applying erroneous numbers in their Libor submissions was not just shocking; it could be disastrous for the entire financial system. 

The reaction of those present is not recorded, but the second half of the minutes records an implicit warning of the danger of attempting to fiddle Libor numbers. 

“Libor indices needed to be of the highest quality given their important role as a benchmark for corporate lending and hedging, and as a reference rate for derivatives contracts,” the minutes say.

Assuming that the Telegraph's Harry Wilson's article is accurate and we apply the standards the Bank of England applied to Barclays' Bob Diamond (not 'fit and proper' as he knew or should have known about Libor manipulation), it looks like a number of the senior Bank of England officials should be unemployed shortly.