Regulator hits Barclays with the UK's biggest ever fine of £284m
The Financial Conduct Authority (FCA) has hit Barclays with a £284 million fine - the UK's biggest ever financial penalty - for failings in its foreign exchange (FX) business.
The FCA said the bank's failings had "undermined confidence in the UK financial system… putting its integrity at risk."
The total fine of £284,432,000 is the largest financial penalty ever imposed by the FCA, or its predecessor the Financial Services Authority (FSA).
But the bank is paying out a total of £1,533 million in fines as it has also had to settle with the US Commodity Futures Trading Commission, the New York State Department of Financial Services, the U.S. Department of Justice, and the Board of Governors of the Federal Reserve System.
The FCA partnered with the US regulators to launch a joint investigation into the bank's FX business. Those US regulators and authorities have also imposed fines on Royal Bank of Scotland, Citigroup, JP Morgan, and UBS for FX rigging.
In total, the five banks are facing financial penalties of £3.7 billion.
The FCA found that between 1 January 2008 and 15 October 2013, Barclays' did not police its FX business adequately, meaning traders were allowed to put Barclays' interests ahead of those of its clients. Traders inappropriately shared information about client activities and tried to manipulate currency rates, colluding with traders at other firms in the process.
Georgina Philippou, the FCA's acting director of enforcement and market oversight said: "This is another example of a firm allowing unacceptable practices to flourish on the trading floor. Instead of addressing the obvious risks associated with its business Barclays allowed a culture to develop which put the firm's interests ahead of those of its clients and which undermined the reputation and integrity of the UK financial system.
"Firms should scrutinise their own systems and cultures to ensure that they make good on their promises to deliver change."
Barclays' traders communicated with traders from other firms in online chat rooms, describing themselves as "the players". The FCA said one trader called himself and his friends "the 3 musketeers".
They rigged currencies to ensure the rate at which Barclays had agreed to sell a particular currency to its clients was higher than the average rate at which it had bought that currency in the market to ensure a profit for the firm.
Had Barclays not settled the fine with the FCA when it did, it would not have received a 20% discount in penalty and would have faced a fine of £355 million. We have worked closely with other regulators in the US on this case including the Commodities Futures Trading Commission (CFTC), the Federal Reserve Bank of New York, the New York State Department of Financial Services (NYDFS), and the U.S. Department of Justice (DOJ).
Antony Jenkins, Barclays chief executive, did not apologise, but said: "The misconduct at the core of these investigations is wholly incompatible with Barclays' purpose and values and we deeply regret that it occurred. This demonstrates again the importance of our continuing work to build a values-based culture and strengthen our control environment. We remain completely committed to that effort.
"I share the frustration of shareholders and colleagues that some individuals have once more brought our company and industry into disrepute. Dealing with these issues, including taking the appropriate disciplinary action against the individuals involved, is a necessary and important part of our plan to transform Barclays and remains a key priority."
A type of derivative often lumped together with options, but slightly different. The original derivative was a future used by farmers to set the price of their produce in advance before they sowed the seeds so that after the harvest, crops would be sold at the pre-agreed price no matter what the movements of the market. So a future is a contract to buy or sell a fixed quantity of a particular commodity, currency or security (share, bond) for delivery at a fixed date in the future for a fixed price. At the end of a futures contract, the holder is obliged to pay or receive the difference between the price set in the contract and the market price on the expiry date, which can generate massive profits or vast losses.
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.
A term applied to raw materials (gold, oil) and foodstuffs (wheat, pork bellies) traded on exchanges throughout the world. Since no one really wants to transport all those heavy materials, what is actually traded are commodities futures contracts or options. These are agreements to buy or sell at an agreed price on a specific date. Because commodity prices are volatile, investing in futures is certainly not for the casual investor.