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Barclays CEO Jes Staley faces probe, bonus cut over whistleblower

LiveMint logoLiveMint 10-04-2017 Suzi Ring

London/New York: Barclays PLC chief executive officer Jes Staley will be reprimanded and the bank will cut his pay as regulators begin to investigate how he tried to unmask a whistleblower last year.

The UK Financial Conduct Authority is investigating both Staley’s individual conduct relating to the complaint and the bank’s responsibilities and controls in connection with whistleblowing, the bank said in a statement on Monday. Staley has admitted his error and formally apologized to the board, Barclays said.

Staley tried to unmask a tipster who alerted the bank to a personal matter involving a senior executive, the bank said, confirming what a person with knowledge of the matter told Bloomberg. An investigation by law firm Simmons & Simmons LLP concluded that Staley “honestly, but mistakenly” believed that it was permissible to identify the author of the letter. The case is also under scrutiny by the Department of Financial Services in New York, the person said.

“I have apologized to the Barclays board and accepted its conclusion that my personal actions in this matter were errors on my part,” Staley said in the statement. “I will also accept whatever sanction it deems appropriate. I will cooperate fully with the Financial Conduct Authority and the Prudential Regulatory Authority, which are now both examining this matter.”

Stock slips

Barclays shares dropped as much as 1.2% in London trading and were down 0.4% at 214.6 pence as of 8:05 am. The stock has fallen about 4.1%this year, giving the company a market value of £36 billion.

Barclays has made excellent progress under Staley and his removal at this stage would hurt the bank’s prospects for further improvement, Shore Capital analyst Gary Greenwood wrote in a note to investors. Given the bank’s history of regulatory misdemeanours, the latest investigation is a “very significant embarrassment” for the board as it tries to rebuild Barclays’s reputation, he said.

Staley has revamped his management team and refocused on the bank’s priority markets since he assumed leadership of Barclays in late 2015. He also rebuffed calls to spin off or radically shrink the investment bank, instead opting to speed up business sales and sell down the firm’s African banking stake.

Bank turnaround

The CEO has slashed about 6,000 jobs in the last six months and cut dividends after fourth-quarter profit fell. The Barclays’s chief ascended to the top job after more than three decades at JPMorgan Chase & Co.

The attempt to identify the whistleblower came to the attention of the Barclays board early this year after an employee raised concerns. The board notified the FCA and the PRA and other authorities.

“The board has concluded that Jes Staley, group chief executive officer, honestly, but mistakenly, believed that it was permissible to identify the author of the letter and has accepted his explanation that he was trying to protect a colleague who had experienced personal difficulties in the past from what he believed to be an unfair attack, and has accepted his apology,” Chairman John McFarlane said in the statement.

US law enforcement

Staley requested that the bank’s Group Information Security team identify the author and the team asked for and received assistance from US law enforcement agencies, according to the statement. The attempt to identify the author wasn’t successful, the bank said.

Barclays has taken a more aggressive posture toward government allegations than some of its rivals. While other lenders settled similar claims, Barclays balked at paying the amount the government sought to resolve allegations that it deceived investors who purchased $31 billion of mortgage-backed securities a decade ago, before the housing bubble popped. The bank is now defending a lawsuit brought by the US justice department in December over the matter.

The bank has called those allegations “disconnected from the facts.”

If found to have violated whistleblower laws, Barclays could face penalties from regulators.

In an unrelated matter, Barclays has been accused of unfairly dismissing an employee who levied a complaint. Richard Boath, who was Barclays’s chairman of financial institutions, said in a UK lawsuit that he was interviewed by the Serious Fraud Office in 2014 as part of its investigation into the bank’s £7 billion fund-raising at the height of the financial crisis. Boath said he was dismissed from the bank in 2016 as a “direct result” of the SFO giving a transcript of the interview to the bank, his lawyer, Jonathan Cohen, said to an employment tribunal last year. Barclays declined to comment at the time. Bloomberg

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