The LIBOR scandal: Culture clubbed "I THINK it's very important that people don't expect too much from regulation," said Sir Mervyn King, governor of the Bank of England, a few days after Barclays bank had paid £290m ($450m) in fines for attempting to rig LIBOR, a benchmark interest rate, between 2005 and 2009. But as Barclays" chastened chairman, Marcus Agius, was questioned by a parliamentary committee on July 10th, it became clear that regulators are increasingly minded to discipline banks they judge to be poorly managed. Mr Agius confirmed to MPs that watchdogs had forced Barclays" chief executive, Bob Diamond, to resign after the bank's misdeeds became public. On July 2nd Sir Mervyn summoned Mr Agius and his deputy, Sir Michael Rake, to a meeting at which they were told that Mr Diamond had lost the support of the Bank of England and the Financial Services Authority (FSA). Sir Mervyn said he had no power to direct Barclays. But Mr Agius realised he had little choice in the matter. He later called at the home of Mr Diamond, who resigned the next day. Barclays" boss will receive a £2m payoff but will forgo deferred bonuses due to him worth up to £20m. It is part of City folklore that the central-bank governor can bring financiers into a line by raising his eyebrows. Mr Agius, though a City veteran, was surprised to get the creased-forehead treatment. The FSA is one of the three agencies (the others are American) with which Barclays had co-operated during the probe into LIBOR fixing, which is ongoing and is likely to finger other banks. The regulator said nothing about a loss of faith in Mr Diamond when it published its settlement with Barclays. "We relied on that," said Mr Agius. The subsequent furore may have surprised the FSA and the Bank of England as much as it did Barclays. Yet it emerged that regulators have harboured qualms about Barclays for a while. In April Lord Turner, the FSA's chairman, cited conduct that, while within the rules, was at the "aggressive end of interpretation." Barclays gave "the confusing and potentially misleading impression" of its capital strength when regulators carried out stress tests of big European banks. It badgered FSA staff after they had refused to permit it to reclassify assets in a way that would allow it to hold less regulatory capital. As Mr Agius summarised Lord Turner's criticisms: "We overdid it." Lord Turner, who is due to testify in front of MPs on July 16th, may be one of the few people to come out of the LIBOR drama with his reputation burnished. The documents suggest he is prepared to shove back if he feels a bank under his charge is pushing its luck. Though seen as too left-wing by some Tories, Lord Turner has ambitions to take over from Sir Mervyn when the governor steps down next June, by which time the bit of the FSA that supervises banks will have been folded into the Bank of England. His main rival is Paul Tucker, one of Sir Mervyn's deputies, who appeared in front of MPs the day before Mr Agius. He denied the suggestion (drawn from a note written by Mr Diamond in 2008) that he had nudged Barclays to report lower borrowing rates so as to assuage fears over its finances. Mr Tucker said he had merely advised Mr Diamond to be careful that Barclays" money-market desk was not unthinkingly sending up "distress flares." It was Mr Tucker's job to take the markets" pulse, but his association with the LIBOR scandal could hurt his chances of becoming Bank governor. By contrast, the sleek Lord Turner can use his upcoming testimony to MPs to polish his credentials.