Former Barclays CEO Martin Taylor says he had asked Bob Diamond to stay on as head of Barclays Capital back in 1998 after the latter offered to resign following losses of hundreds of millions of pounds from Russia's debt default. According to Taylor those losses were the result of Diamond's unit failing to adhere to trading limits set by the firm.

In a column in the Financial Times, Taylor says Diamond asked the credit committee for higher trading limits. But when the division didn't get the limits it was looking for, it "falsely marked some Russian banking counterparties as Swiss or American" and "blasted through the ceiling."

"The traders were fired. Their leader maintained that he had known nothing about what was going on. He felt terrible. He loved Barclays. He offered to go," Taylor said about Diamond.

"I concluded that the embryonic business that BarCap then was would fall apart without him, and that he should stay."

According to Taylor, all international banks took losses on Russia in 1998, but Barclays’ experience was especially worse because of the failure of Diamond's division to respect internal controls.

"It was a close call," Taylor says of his decision to retain Diamond as head of Barclays Capital.

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