The City watchdog warned Barclays two years ago that appointing Bob Diamond as chief executive could prove unsuitable, documents revealed.
Hector Sants, the then head of the Financial Services Authority (FSA), told former Barclays chairman Marcus Agius that the regulator 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.
Mr Diamond resigned amid intense political and public pressure after Barclays was fined £290 million by UK and US regulators for manipulating the Libor, a key interbank lending rate.
Mr Sants met Mr Agius on September 15, 2010, to confirm the FSA's approval of Mr Diamond's appointment but with some issues it expected the Barclays board to address.
He raised concerns over Mr Diamond's relationship with the regulator, the file note said, and added that he had "not reached the level of openness, transparency and willingness" seen in his predecessor John Varley.
Mr Varley planned to "coach" Mr Diamond in his remaining six months.
Mr Agius reportedly said Mr Diamond was "very competitive and lost out in the previous chief executive selection" but will "mature and relax" given he achieved his goal.
In a letter sent to committee chairman Andrew Tyrie MP on August 20 this year, Mr Sants said: "The FSA was fully aware that the ongoing investigation might come to conclusions which would be relevant to Mr Diamond's suitability.
"However, at the time, since the investigation was not concluded, it would not have been appropriate to prejudge its outcome."
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