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The board at Barclays was told in February that the relationship between the bank's senior management and the FSA had "broken down", according to the chairman of the Treasury Select Committee.
Speaking during a three-hour grilling of former Barclays CEO Bob Diamond yesterday, committee chair Andrew Tyrie said senior figures at the FSA informed the board in February that Diamond and his management team had 'lost their confidence'.
Tyrie also said the FSA had raised concerns about the appointment of Diamond in September 2010 and sought confirmation there would be a "change of culture" at the bank.
Tyrie is expected to write to the bank asking the letters from the FSA to be made public, according to the Daily Telegraph.
A staunch defence from Diamond during the hearing saw the former Barclays boss repeat assertions that the bank operates with a "no jerks rule" which means those who break the rules have to leave.
Despite a grilling from MPs, the former boss refused to accept personal responsibilty for the "reprehensible behaviour" of 14 rogue traders who had colluded to fix the interbank lending rate.
He said he took responsibility for the scandal as head of the company, but denied "personal culpability" for the rate fixing scandal.
When he read the emails exchanged by these traders, he felt "physically sick", he added.
Diamond said he had no knowledge of the LIBOR scandal which has rocked Barclays until this month, despite having signed off an annual report revealing the bank was under investigation back in March.
He dodged several key questions including whether former Barclays chairman Marcus Agius came under pressure from the regulator for Diamond to step down.
The question of whether Diamond will accept a payoff of up to £18m as he exits the bank remains unanswered, despite pressure from MPs, as Diamond said the decision would be a matter for the board.
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