Barclays Fined $455.6m Million Over Trading Probes, Bosses Waive Bonuses

This is the largest fine ever imposed by the FSA.

Barclays’ breaches of the FSA’s requirements encompassed a number of issues, involved a significant number of employees and occurred over a number of years. Barclays’ misconduct included:

• making submissions which formed part of the LIBOR and EURIBOR setting process that took into account requests from Barclays’ interest rate derivatives traders. These traders were motivated by profit and sought to benefit Barclays’ trading positions;
• seeking to influence the EURIBOR submissions of other banks contributing to the rate setting process; and
• reducing its LIBOR submissions during the financial crisis as a result of senior management’s concerns over negative media comment.

In addition, Barclays failed to have adequate systems and controls in place relating to its LIBOR and EURIBOR submissions processes until June 2010 and failed to review its systems and controls at a number of appropriate points.

Barclays also failed to deal with issues relating to its LIBOR submissions when these were escalated to Barclays’ Investment Banking compliance function in 2007 and 2008.

Tracey McDermott, acting director of enforcement and financial crime, said: 'Barclays’ misconduct was serious, widespread and extended over a number of years. The integrity of benchmark reference rates such as LIBOR and EURIBOR is of fundamental importance to both UK and international financial markets. Firms making submissions must not use those submissions as tools to promote their own interests'.

'Making submissions to try to benefit trading positions is wholly unacceptable. This was possible because Barclays failed to ensure it had proper controls in place. Barclays’ behaviour threatened the integrity of the rates with the risk of serious harm to other market participants.

'The FSA continues to pursue a number of other significant cross-border investigations in this area and the action we have taken against Barclays should leave firms in no doubt about the serious consequences of this type of failure'.

The BBA is currently undertaking a review of the way LIBOR is set and will publish its findings shortly. The FSA, along with the other tripartite authorities, is working to support market-led reviews of existing arrangements, with the goal of ensuring such arrangements continue to command the confidence of all stakeholders.

Barclays co-operated fully during the FSA’s investigation and agreed to settle at an early stage. The firm qualified for a 30% discount under the FSA’s settlement discount scheme.

The CFTC brought attempted manipulation and false reporting charges against Barclays for similar failings, which the bank agreed to settle. The CFTC imposed a penalty of US$200 million. In addition, as part of an agreement with the DOJ, Barclays admitted to its misconduct and agreed to pay a penalty of US$160 million.

Barclays Chief Executive, Bob Diamond, said: 'The events which gave rise to today’s resolutions relate to past actions which fell well short of the standards to which Barclays aspires in the conduct of its business. When we identified those issues, we took prompt action to fix them and co-operated extensively and proactively with the Authorities. Nothing is more important to me than having a strong culture at Barclays; I am sorry that some people acted in a manner not consistent with our culture and values. To reflect our collective responsibility as leaders, Chris Lucas, Jerry del Missier, Rich Ricci and I have voluntarily agreed with the Board to forgo any consideration for an annual bonus this year'.

Barclays Chairman, Marcus Agius, said: 'The Board takes the issues underlying today’s announcement extremely seriously and views them with the utmost regret. Since these issues were identified, the Authorities acknowledge that Barclays management has co-operated fully with their investigations and taken, and continues to take, prompt and decisive action to correct them. In addition, the Board welcomes the example set by Bob Diamond, Chris Lucas, Jerry del Missier and Rich Ricci in recognising their collective responsibility as leaders of Barclays'.