Barclays Saudi Investigation Adds To Jenkins’s Regulatory Woes
Barclays Plc (BARC) Chief Executive Officer Antony Jenkins, almost two years after his predecessor said it was time for banks to stop apologizing, is still grappling with multiplying number of probes by regulators.
The U.S. Department of Justice is investigating whether the lender made payments that violated the Foreign Corrupt Practices Act to win a banking license for its wealth-management unit in Saudi Arabia, the Financial Times reported on Nov. 9, citing unidentified people familiar with the talks. The bank is already being probed by the Serious Fraud Office over fees it paid in 2009 to Qatar’s sovereign-wealth fund as the lender sought money to avoid a government bailout.
For Jenkins, who replaced Robert Diamond after the lender paid a record fine for manipulating Libor, the probes are likely to be a bigger setback to his efforts to show politicians the bank can put regulatory missteps behind it than the size of any fines, according to analysts. He may have to include stiffer internal controls to detect staff who break laws in pursuit of revenue when he announces the results of his review of Barclays’s operations in February, said Christopher Wheeler, a London-based banking analyst at Mediobanca SpA.
“Jenkins has to continue to batten down the hatches, say these issues came out of the pre-crisis period and say he can create an atmosphere where it doesn’t happen again,” said Wheeler, who rates the shares an outperform. “The more that comes out, the more he can wave the big stick in February.”
British Lawmakers
In January 2011, Diamond told a panel of British lawmakers that the time for “remorse and apology” for banks needed to be over. Since then, the lender has paid a record 290 million-pound ($461 million) fine after regulators found its investment bankers tried to manipulate the London interbank offered rate.
The consumer bank, which Jenkins, 51, previously ran, has also been hobbled by compensation claims from Britons wrongly sold so-called payment-protection insurance they didn’t require or lost them money. The lender last month set aside an additional 700 million pounds to cover the costs of redress, bringing the total to 2 billion pounds, second only to Lloyds Banking Group Plc (LLOY), the country’s biggest mortgage lender.
U.S. regulators this month also proposed levying a record $470 million in penalties on Barclays after it allegedly gamed energy markets in the Western U.S. from late 2006 to 2008.
John McGuinness, a Barclays spokesman, and the Department of Justice’s Rebekah Carmichael declined to comment on the Saudi probe. The Saudi Arabian capital markets regulator, known as the CMA, said it is “not aware of any investigation” into Barclays and hasn’t received any inquiries from regulators on the matter.
Shares Fall
The stock fell 2.7 percent on Nov. 9 to 230.15 pence in London trading, for a market value of 28 billion pounds. The shares have advanced 31 percent this year, the third-biggest increase among British banks after Lloyds and Royal Bank of Scotland Group Plc. (RBS)
Barclays, Britain’s second-largest bank by assets, received a license from Saudi Arabia’s market authority to operate in the kingdom in August 2009. The London-based lender sought to expand its wealth-management operation in the region as the country’s oil wealth created more millionaires.
The lender said in an Oct. 31 filing that the Justice Department and Securities and Exchange Commission were probing whether its relationships with unidentified third parties who help the bank win business comply with the Foreign Corrupt Practices Act.
Bloomberg
