By: FT Reporters
Bank’s board vows to cut Jes Staley’s pay as UK regulators probe affair
Jes Staley, Barclays chief executive, who has publicly pushed for the highest ethical standards at his bank, is facing major sanctions from UK regulators and a “very significant” pay cut for trying to uncover the identity of a whistleblower who raised concerns about a former colleague Mr Staley hired.
The American is being investigated by the Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority for breaking rules surrounding the treatment of whistleblowers, the bank said on Monday. Barclays’ policies for handling whistleblowing are also being investigated.
While Barclays did not mention investigations by any other regulators, New York’s Department of Financial Services is also investigating the matter, said a person briefed on its probe.
An external investigation commissioned by Barclays’ board has already concluded that Mr Staley acted “honestly but mistakenly” in trying to identify the whistleblower last year, and the board has vowed to cut his multimillion-pound annual pay package, the bank said in a statement. Mr Staley’s attempt to identify the whistleblower was ultimately unsuccessful.
“I am personally very disappointed and apologetic that this situation has occurred, particularly as we strive to operate to the highest possible ethical standards,” said John McFarlane, Barclays chairman.
The revelations are a significant blow to the British bank, which has spent much of the past five years attempting to repair its ethical reputation following its role in the Libor rigging scandal. In 2012, it was forced to pay £290m in fines to US and UK regulators and lost its chief executive for attempting to manipulate the interbank lending rate.
Mr Staley, a former JPMorgan investment banker, was hired in 2015 from New York hedge fund BlueMountain Capital as part of an effort to restructure Barclays after a failed effort to downsize its investment banking division.
Mr 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.”
Barclays will decide on the size of the hit to Mr Staley’s pay only after the regulators’ investigations into the affair is complete, Barclays said. Last year, Mr Staley made £4.2m.
The Labour party’s John Mann, a long-term critic of Barclays, said Mr Staley should resign over the debacle. Tim Farron, leader of the Liberal Democrats, said: “If either of the two inquiries find serious wrongdoing [by] Mr Staley, then he will have to do the honourable thing and go.
”Major FCA investigations typically take several months, and people familiar with the inquiry said that it remained at a very early stage. Potential regulatory sanctions range from fines and public censures to a ban on working in regulated finance.
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The allegations stem from an attempt by Mr Staley to protect a Barclays colleague from what he deemed an “unfair attack” in two anonymous letters last June. They alleged that a recently-recruited “senior employee” had personal problems and raised concerns about Mr Staley’s involvement in that person’s hiring.
A person familiar with the probe confirmed that the individual who Mr Staley had been trying to protect was Tim Main, a New York-based banker who joined Barclays in June 2016 to be chairman of the investment bank’s financial institutions group.
Although Mr Main came to Barclays from Evercore, he had previously spent 20 years at JPMorgan, where he rose through the ranks along with Mr Staley. Mr Main declined to comment through a Barclays spokesperson.
Barclays’ board only learnt of Mr Staley’s efforts to identify the tipster in January when a second whistleblower, this time a Barclays employee, came forward. The bank said that person raised concerns partly over the adequacy of its whistleblowing procedures.
McFarlane said the board “has accepted [Mr Staley’s] 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”.
One person close to Mr Staley said he felt personally aggrieved by the original whistleblowing allegations and originally believed that he had done little wrong.
That person said he believed that under US law, last summer’s letters would not necessarily count as whistleblowing, even though the bank’s compliance team logged them as such.
The bank said it had instructed law firm Simmons & Simmons to conduct an investigation which found that Mr Staley erred in trying to identify the authors of the letters, who in the end were not unmasked. Barclays’ board also informed the FCA and PRA.
According to Simmons & Simmons’ investigation, Mr Staley “considered the letters were an unfair personal attack”. He asked the bank’s information security team to identify the authors but was informed that this was not appropriate.
Then in July, after the allegations had been investigated and dismissed, Mr Staley asked the information security team again to attempt to identify the author. The information security team, with the assistance of a US law enforcement agency, attempted to identify the author but was unsuccessful, the bank said.The FCA declined to comment, as is its normal process for active investigations.
Mr McFarlane stressed that Mr Staley “continues to have the board’s unanimous confidence” given “the circumstances of this matter and his otherwise exemplary record since joining Barclays, including contributing significantly to improvements in Barclays’ culture and controls”.
Barclays will also begin an independent review into its whistleblowing processes.
Gary Greenwood, analyst at Shore Capital, said: “Given Barclays’ history of regulatory misdemeanours, most notably the high-profile investigation into Libor rigging which led to former chief 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.”
However, Mr Greenwood added that the bank had made good progress under Mr Staley and that to “remove [him] 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”.
Shares in the group dropped briefly but recovered to close up slightly at 216.35p.
Reported by Laura Noonan in Dublin, Nicholas Megaw, Caroline Binham, Jennifer Thompson and Emma Dunkley in London, and Patrick Jenkins in New York.
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