Closing summary: Regulators investigate Barclays over whistleblower
Here’s a roundup of the day’s events involving the Barclays whistleblower:
Regulators are investigating the bank and its chief executive Jes Staley after he attempted to unmask a whistleblower who had written anonymous letters expressing concerns about a senior executive.
Staley ordered an investigation in an effort to identify the whistleblower but was susequently told this was not appropriate. But a month later, in what the bank called an “honestly held but mistaken belief,” he thought he had clearance to identify the author of the letters.
The executive involved was named as Tim Main, who joined the bank in June 2016 as chairman of the investment bank’s financial institutions group.
In an email to staff Staley admitted he had made a mistake and said he had got too personally involved. He said he wanted to prevent continuing smears against an individual who did not deserve it.
Staley has been formally reprimanded and faces losing part of his bonus.
MP John Mann said if the story was true Staley should resign and the Institute of Directors said the situation was “clearly disappointing.”
Barclays had made a point of saying in its annual report that staff could raise concerns in confidence without fear of retaliation.
Our latest report on Barclays is here:
Still with the banking sector, and the Bank of England is facing new claims it interfered with the setting of libor rates during the 2008 financial crisis, according to the BBC’s Panorama programme.
On that note, it’s time to close for the day. Thanks for all your comments and we’ll be back tomorrow.
Reuters Breaking Views columnist Dominic Elliott says Jes Staley’s actions may seem morally defensible since he wanted to defend a colleague from what he saw as unfounded smears, but the situation calls Barclays’ internal procedures into question. Elliott concludes:
Given Staley should have known the rules, it reflects badly on him. It also looks bad for Barclays: the incident only came to light as a result of a separate complaint about the bank’s whistleblowing regime this year. That suggests more profound failings. A board-instigated review of the related procedures feels like too little, too late.
More reaction to the Barclays whistleblowing:
Cathy James, chief executive of whistleblowing charity Public Concern at Work:
In a bizarre way this is whistleblowing working. The board has become aware of inappropriate conduct at the highest level and has taken action - they have then made a public statement - this is a bold move but it also shows that they want to mitigate against the damage done by the CEO’s actions. This is to be seen in the context of regulators in the sector pushing the agenda and an ongoing investigation. It’s these sort of cases, where senior executives are involved, that show how important it is... It’s too early to say whether there is going to be marked change though.
Employment lawyer Anna Birtwistle from CM Murray:
While cutting Mr Staley’s pay may outwardly appear to represent a strong response from Barclays, it is difficult to reconcile the Board’s continued confidence in Mr Staley with its stated commitment to whistleblowing. Fostering an open culture of disclosing wrongdoing in the workplace requires top down stewardship and while it may be understandable that Barclays has backed Mr Staley given his successes in post, the bank’s response to Mr Staley’s actions may give mixed messages to its employees and the wider financial services industry about the steadfastness of its commitment to whistleblowing.
Staley defends himself in email to staff
Barclays boss Jes Staley has just sent an email out to all staff defending his actions. While apologising and saying he would co-operate with the investigation he said he acted because he believed the whistleblower’s actions were intended to maliciously smear the executive involved.
But he admitted he had got “too personally involved” adding: “My hope was that if we found out who was sending these letters we could try and get them to stop the harassment of a person who did not deserve that treatment.”
And he said he realised he should have let the compliance department handle the matter and that was a mistake.
Updated
More reaction to the whistleblowing news. Laith Khalaf, senior analyst at Hargreaves Lansdown, said:
Incidents like this do nothing to convince the public that banking misdemeanours are in the rear-view mirror, and this is undoubtedly an embarrassment, not to mention a distraction, for Barclays and its CEO.
Barclays has actually been doing quite well under Jes Staley’s leadership, so this error is a blemish in what was starting to look like a promising tenure. Shareholders will be doubly disappointed that the bank is once again in trouble with regulators, and that the man at the top of the organisation is responsible for it.
The Barclays share price hasn’t reacted much to news of this investigation, which is probably a sad reflection that the market thinks the potential costs of this infringement are small beer in the context of the litigation and conduct costs racked up by the bank in recent years.
Tim Main named as Barclays executive in whistleblower letters
The person Barclays boss Jes Staley was trying to protect because he thought the anonymous letters “were an unfair personal attack on the senior employee” has been named as Tim Main.
Main joined Barclays in June 2016 to be chairman of the investment bank’s financial institutions group, based in New York. He joined Barclays from Evercore but had previously spent 20 years at JP Morgan.
Before moving to Barclays he advised on a number of major deals including the merger of Wachovia and Wells Fargo banks.
At the time of his appointment John Miller, Barclay’s head of America’s banking, said: “Tim has an outstanding track record and vast knowledge, experience and relationships. His expertise fits perfectly with our origination-led banking model. This appointment reflects our ongoing commitment to bringing top-tier talent into Barclays, and providing clients with first-class strategic advice.”
Our updated report on the whistleblowing is here:
Barclays had said staff "could raise concerns in confidence without fear of retaliation"
Barclays appointed non-executive director Mike Ashley (not the Sports Direct founder!) as whistleblower’s champion in 2016, and in the bank’s most recent annual report he had this to say:
“An additional responsibility I have assumed under the Senior Managers Regime is that of Whistleblower’s Champion, a position required by the FCA to be held at Board level. As champion, I have specific responsibility for the integrity, independence and effectiveness of the Barclays’ policies and procedures on whistleblowing, including the procedures for protecting employees who raise concerns from detrimental treatment. During 2016, I recorded a video message to all employees Group-wide, highlighting my role as Whistleblower’s Champion and raising awareness of the policies and procedures we have in place.”
(Our emphasis)
Also according to the annual report, the bank’s audit committee also looked at “the adequacy of the Group’s arrangements to allow employees to raise concerns in confidence without fear of retaliation and the outcomes of any substantiated cases.”
It concluded that “Barclays’ processes were appropriate and in line with peers. It noted that the successful internal campaign had generated an increase in the number of whistleblowing reports, all of which were investigated. Volumes of cases remain proportionate to Barclays’ size and footprint. The Committee asked management to provide additional detail in its future reports where any whistleblowing investigation was outstanding for more than six months. In future, as Barclays Whistleblowing Champion, the Chairman of the Committee will make an annual report to the Board on whistleblowing matters.”
Updated
Here’s a quote in an internal memo to Barclays staff from Jes Staley when he was named as the new chief executive in 2015:
There can be no retreat from becoming a values-driven organisation which conducts itself with integrity at all times.
And here’s a comment from JP Morgan boss Jamie Dimon about Staley in a Fortune report from 2010 (H/T Thomas Candela):
Jes has impeccable character and integrity.
Jes Staley’s attempts to track down a whistleblower are “clearly disappointing” and the action from regulators should be a wake-up call to company boards. Oliver Parry, the IoD’s head of corporate governance tells my colleague Julia Kollewe:
Protection for whistle-blowers is vital if employees are to feel confident in reporting problems, so it is clearly disappointing that Barclays has conceded its CEO breached the rules. The bank has admitted its error, and it is right that the CEO has had his pay cut to show the seriousness of the issue.
Barclays is absolutely correct to review its processes to make sure this doesn’t happen again, and shareholders will want further clarity at the upcoming annual meeting. The UK has a reputation for high standards of corporate governance, but boards only work when all directors are aware of their roles and responsibilities.
Today’s action from the regulator should be a wake-up call to executives to make sure they constantly refresh their knowledge of the rules.
"Staley has to resign" if story true - MP John Mann
John Mann, the Labour MP and member of the Treasury Committee, is not impressed. He said if the regulators were indeed probing Barclays over the attempts to identify the whistleblower, the bank’s chief executive Jes Staley “has to resign”.
Updated
Here’s some reaction to the Barclays situation. Economist Shaun Richards writes:
I would imagine that pretty much everyone reading this is aware of modern whistleblowing procedures so it seems strange that the CEO of Barclays was not. Actually even when he was told he had another go a month later.
There is a clear example of “back to the future” when we note that rather than being sacked we move into Yes Prime Minister land as he will receive one of the “strongly worded letters” so beloved of the apochryphal civil servant Sir Humphrey Appleby! We are told there will be this too “a very significant compensation adjustment will be made to Mr Staley’s variable compensation award.” But as it is “variable” how will we know?
And a former Tory local councillor says:
If whistleblowing is going to form any real part of corporate governance going forwards, regulators need to throw the book at Jes Staley.
— Chris Howell (@moufflon) April 10, 2017
Richard’s “month later” comment refers to this section of the Barclays statement:
· Having been given a copy of the first letter [received in June 2016] and made aware of the second, Mr Staley initially requested that the Group Information Security (GIS) team attempt to identify the authors of the letters. Mr Staley considered that the letters were an unfair personal attack on the senior employee.
· Mr Staley was subsequently informed that it was not appropriate to take steps to identify the authors. Following this, neither Mr Staley nor the GIS team took any such further action.
· In July 2016, Mr Staley enquired whether the whistleblowing issue with the letters had been cleared. Following this, Mr Staley’s honestly held, but mistaken, belief was that he had clearance to identify the author of one of the letters.
Back with the latest Libor reports and the Bank of England has issued the response it made to the BBC’s Panorama programme:
Libor and other global benchmarks were not regulated in the UK or elsewhere during the period in question. Nonetheless, the Bank of England has been assisting the SFO’s criminal investigations into Libor manipulation by employees at commercial banks and brokers by providing, on a voluntary basis, documents and records requested by the SFO.
The Bank is committed to publishing materials relating to the SFO’s investigations into benchmark manipulation when it is appropriate to do so.
Until the SFO’s ongoing prosecutorial activity relating to Libor and other benchmarks has concluded, the Bank is not in a position to publish these materials.
Here’s our report on the attempt by Barclays boss Jes Staley to track down a whistleblower:
Barclays has refused to comment on whether the US Department of Financial Services is also investigating.
"The Barclays Way"
Here’s what The Barclays Way - its code of conduct - has to say on the subject of employees raising concerns:
Sometimes the actions of a few may put our reputation at stake. If you believe something is not right – like misconduct, fraud or illegal activity – or if you feel that our standards aren’t being met, it is really important that you speak up. Any concerns you may have can be raised in confidence by:
• Discussing the matter with your manager, or manager’s manager
• Talking directly to your local Compliance team
• Contacting the Whistleblowing team via the Raising Concerns hotline or mailbox.
Concerns raised are taken seriously, treated sensitively, and where appropriate, independently investigated. Where permitted by law, you can raise your concerns with the Whistleblowing team anonymously.
(Our italics)
Barclays is not only facing an investigation into chief executive Jes Staley’s attempts to unmask a whistleblower from UK regulators.
The Department of Financial Services in New York is also looking into the matter, according to Bloomberg.
City trader Tom Hayes, the first person convicted of rigging Libor and serving an 11-year sentence, has issued a statement on the BBC story that the Bank of England put pressure on banks to lower their rates:
The involvement of the Bank of England in lowballing Libor was a key plank of my defence. The prosecution did not give me the evidence I needed to prove it and my jury were misled. It is my view that there should be an urgent public inquiry into the real Libor scandal: where central banks, politicians and the British Bankers’ Association colluded to get artificially low Libor rates. Traders like me should not be in prison - we were only requesting Libor submissions that reflected market conditions. I have now been in a high security prison for over 18 months but I swear that I did not know that requesting Libor rates that benefitted my bank but which also reflected the market was wrong.
So far this latest run-in with the regulators has not had much effect on Barclays share price. It is down just 0.2% at 214.85p.
Regulatory fatigue? Or do investors believe a severe reprimand for a FTSE 100 chief executive and a subsequent bonus cut - an event rare as hen’s teeth - is nothing much to worry about? Or is everyone off on their Easter break?
Barclays says that in the wake of its chief executive Jes Staley’s attempts to track down the whistleblower “a very significant compensation adjustment will be made to Mr Staley’s variable compensation award.” My colleague Julia Kollewe has crunched the numbers:
Jes Staley received a total pay package of £4.2m last year including an annual bonus of £1.3m (60% of his maximum bonus opportunity for the year). For this year, he is in line for an annual bonus of up to £1.88m and another bonus under the long-term incentive plan of up to £2.82m, on top of his annual fixed pay, which amounted to £2.35m last year.
Updated
Bank of England pressured banks on libor rates - BBC
The Bank of England may be relieved that Barclays’ woes have taken some of the attention away from new claims it had interfered with the setting of libor rates - which tracks how much it costs banks to borrow from each other.
A BBC Panorama report claims a secret recording shows the Bank repeatedly put pressure on commercial banks to push their libor rates down during the 2008 financial crisis. The BBC story is here.
This is a problem Barclays could have done without after its host of regulatory issues, but removing Staley from his post could set back its attempts to revive the business, says analyst Gary Greenwood at Shore Capital:
Given Barclays’ history of regulatory misdemeanours, most notably the high profile investigation into Libor rigging which led to former CEO Bob Diamond’s departure from the group, this latest revelation represents a very significant embarrassment for the Board as it tries to rebuild the group’s reputation.
As for Mr Staley, it remains to be seen whether the PRA and FCA come to the same conclusion as the Board in allowing him to remain in his post, although we would assume that the sanctions proposed will have already been discussed with the regulators and should therefore help to mitigate this risk. It is possible that the group may also be fined by the regulators.
Operationally, we believe that Barclays has made excellent progress under the stewardship of Jes Staley, notably in respect of running off non-core assets and rebuilding the capital base. To remove Mr Staley from his role at this juncture would be damaging to further operational progress, with an improvement in return on equity now the key area of focus. While Mr Staley’s reputation has undoubtedly taken a serious knock, we believe that it remains in the best interests of shareholders to keep him in the post of CEO and hence we recommend that they follow the Board’s direction and vote in favour of his reappointment at the AGM in May.
Barclay's boss Staley apologises
Staley said:
I have apologised to the Barclays Board, and accepted its conclusion that my personal actions in this matter were errors on my part. 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.
Our whistleblowing process is one of the most important means by which we protect our culture and values at Barclays and I certainly want to ensure that all colleagues, and others who may utilise it, understand the criticality which I attach to it.
The whole thing started in June 2016 when the bank’s board and a senior executive both received anonymous letters about a senior executive who had been recruited earlier in the year. Barclays said:
Amongst other issues, the letters raised concerns of a personal nature about the senior employee, Mr Staley’s knowledge of and role in dealing with those issues at a previous employer, and the appropriateness of the recruitment process followed on this occasion by Barclays.
When he found out about the letters, Staley attempted to find out who had written them. The bank said he “honestly, but mistakenly, believed that it was permissible to identify the author of the letter.”
He asked the bank’s Group Information Security (GIS) team to investigate and GIS contacted a US law enforcement agency for help.But to no avail, and the whistleblower was not identified.
The board found out about Staley’s actions as “a result of a concern raised by an employee regarding amongst other matters the adequacy of Barclays whistleblowing procedures.”
After its own investigation into Staley’s actions Barclays says it “ 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.
“Taking into account both the circumstances of this matter and his otherwise exemplary record since joining Barclays, including contributing significantly to improvements in Barclays culture and controls, Jes continues to have the Board’s unanimous confidence and it will support his re-appointment at Barclays Annual General Meeting on 10 May 2017.”
Updated
Barclays says it will co-operate with the investigation by the regulators, and will also review its whistleblowing processes.
The banks’ chairman John McFarlane, said:
I am personally very disappointed and apologetic that this situation has occurred, particularly as we strive to operate to the highest possible ethical standards. The Board takes Barclays culture and the integrity of its controls extremely seriously. We have investigated this matter fully using an external law firm and we will be commissioning an independent review of Barclays processes and controls to determine what improvements may be required.
Agenda: Banks in focus on whistleblowing and Libor
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It’s a quiet day on the economic and results front but not for the banking sector, albeit in a way which does it no favours.
The Bank of England has again been embroiled in the never-ending Libor scandal (more in a moment), but first over to Barclays.
The bank and its chief executive Jes Staley are being investigated by regulators over his attempts in 2016 to unmask a whistleblower who had written to express concerns about a recently recruited senior executive.
Barclays said Staley’s attempt to identify the whistleblower came to its attention in early 2017 and it started an investigation by law firm Simmons & Simmons, and also told the regulator the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
Staley said he “honestly but mistakenly believed that it was permissible to identify the author of the letter.”
It plans to formally reprimand Staley and will cut his compensation payment by a “very significant” amount.
Updated
