The Financial Services Authority (FSA) warned Barclays two years ago that appointing Bob Diamond as chief executive could prove unsuitable, documents revealed today.
Former FSA boss Hector Sants told the Barclays chairman that it agreed to Mr Diamond's appointment on the grounds that a Libor-rigging investigation had no "adverse effect."
But Mr Sants emphasised that the investigation was ongoing and could change the FSA's position, according to a file note released by the treasury select committee today.
Mr Diamond resigned amid intense public pressure after Barclays was fined £290 million by UK and US regulators for manipulating the Libor interbank lending rate.
Mr Sants approved Mr Diamond's appointment with certain caveats.
He raised concerns over Mr Diamond's relationship with the regulator, the notes said, and added that he had "not reached the level of openness, transparency and willingness" seen in his predecessor John Varley.