Barclays is embroiled in yet another scandal after admitting it expects to pay £290m to compensate customers for the rates they were charged on currency deals.
The bill, which took its legal and compensation costs to £2.3bn in the first nine months of the year, was revealed just 24 hours after its new boss, investment banker Jes Staley, pledged to clean up the bank’s reputation.
Barclays declined to give any detail about the latest scandal, but the City regulator said it was aware of the new problem at the bank. The finance director, Tushar Morzaria, said it followed an internal review of foreign exchange transactions between 2005 and 2012, when the bank believed it had not been applying appropriate rates. He declined to say whether corporate or retail customers were affected or if they had already received compensation.
The Financial Conduct Authority said it was “aware of the issues and [we] are liaising with the firm on this matter”.
The £290m is part of £1.3bn set aside for compensating customers in the first nine months of this year. A further £1bn is earmarked for ongoing investigations and litigation, including £270m for two claims relating to the sub-prime mortgage crisis in the US.
In the third quarter, there was no additional provision for payment protection insurance mis-selling but the new charge follows a wave of scandals at Barclays, which has been hit by fines for rigging currencies and interest rates.
The Robin Hood Tax campaign, which is calling for taxes on banks, said: “Setting aside another massive provision for scamming its customers does little to restore faith in Barclays’ tarnished reputation.”
The figures were contained in the nine-month results, which set out the challenges facing Staley. He is on a £10m pay packet and will start on 1 December, earlier than expected.
Barclays’ shares sank more than 5% to 239p after the results were released on Thursday morning. Nine-month profits rose 7% to £3.9bn and the bank focused on underlying profits of £5.1bn, a 4% increase, although the City reacted to the fall in the profits in the third quarter.
Even before Staley takes over – replacing Antony Jenkins, who was forced out in July – the bank reduced its targets for returns to shareholders. It blamed the £1bn cost of complying with UK and US rules intended to make the bank safer along with a new corporation tax surcharge announced by George Osborne in July.
Morzaria gave no details of the bank’s plans to meet the so-called Vickers reforms, which require retail banking operations be protected from investment banking by a ringfence. But they are known to be causing Barclays difficulties and the bank is considering putting its retail banking arm under the ownership of its investment bank.
John McFarlane, chairman and interim chief executive since July, said: “As we align Barclays around our three priorities – focus on core [segments and markets], generating shareholder value and instilling a high performance culture with strong ethical values – we now have a forward agenda that has been discussed and agreed with Mr Staley.
“We will update the market on our plans for structural reform after we have agreed them with the regulator. Now that we have a new CEO in place, we will provide further updates on future direction at the full-year results.”
Morzaria, who worked for Staley at JP Morgan, said it was “terrific” the American was joining the bank. The finance director added that the investment bank, Barclays’ traditional powerhouse, had experienced weaker market conditions in October compared with a year ago.
A replacement for Sir Mike Rake, a longstanding boardroom figure who is chairman of newly floated Worldpay, is also planned.
