London - Barclays CEO Jes Staley, who has demanded
the highest ethical standards from staff, will face a “significant” pay cut and
is being probed by regulators for violating policy in trying to unmask a
whistle-blower last year.
The UK Financial Conduct Authority is investigating both
Staley’s individual conduct relating to the complaint and the bank’s
responsibilities and controls in connection with whistle-blowing, the bank said
in a statement. Staley, who will be reprimanded by the firm, has admitted his
error and formally apologized to the board, Barclays said. He could be fined
and faces a ban if he is deemed by the FCA not to be a “fit and proper” person
to lead a bank.
Staley tried to identify a tipster who alerted the bank
to a personal matter involving a senior executive, the bank said, confirming
what a person with knowledge of the matter told Bloomberg earlier Monday. An
investigation by law firm Simmons & Simmons commissioned by Barclays
concluded that Staley “honestly, but mistakenly” believed that it was
permissible to identify the author of the letter. The case is also under
scrutiny by the Department of Financial Services in New York, the person said.
“At present Staley will probably survive as CEO, but if
other allegations of unethical behaviour emerge, this could change,” said Andre
Spicer, a professor specializing in organisational behaviour at the Cass
Business School at City University in London. "No one within the bank is
likely to trust the whistle-blowing system anymore."
Staley, 60, has made overhauling Barclays’s culture and
restoring its reputation the centerpiece of his tenure, after the bank was
fined billions of pounds over scandals including rigging Libor, gaming currency
markets and wrongfully selling customers insurance products they didn’t
need. The FCA and Serious Fraud Office are also investigating the
bank’s 2008 emergency fundraising backed by Qatar, where questions have been
raised about the proper disclosure of fees and services agreements between the
two parties.
Barclays shares dropped as much as 1.2 percent in London
trading, and were little changed at 215.35 pence as of 11:07 a.m. The stock has
fallen about 3.6 percent this year, giving the company a market value of about
36.7 billion pounds ($45.4 billion).
“I have apologised to the Barclays board and accepted its
conclusion that my personal actions in this matter were errors on my part,”
Staley said in the statement. “I will also accept whatever sanction it deems
appropriate. I will cooperate fully with the FCA and the Prudential Regulatory
Authority, which are now both examining this matter.”
Rebuffing
Staley has recruited several former colleagues
from JPMorgan Chase & Co, where he spent more than three decades. The
CEO rebuffed calls to spin off or radically shrink the securities unit, instead
opting to speed up sales of unwanted assets and sell down the firm’s African
banking stake to reduce the bank’s capital requirements.
Staley received a 1.3 million-pound annual bonus and he
may be docked the entire amount as a result of the scandal, according to a
person familiar with the board’s investigation. The bank will not make a
decision about how much to deduct until after the UK regulators complete their
investigation. The CEO was awarded 7.53 million pounds in total compensation
including benefits for last year.
Given the bank’s history of regulatory mishaps, the
latest investigation is a “very significant embarrassment” for the board as it
tries to rebuild Barclays’s reputation, and a “serious knock” for Staley, Shore
Capital analyst Gary Greenwood wrote in a note to investors, adding he doesn’t
think the CEO should be fired. “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.
It is possible that the group may also be fined by the regulators.”
Read also: Barclays to pay R13bn to split from African business
The attempt to identify the whistle-blower came to the
attention of the Barclays board early this year after an employee raised
concerns. The board notified the FCA and the PRA and other authorities.
“The Board has concluded that Jes Staley, group chief
executive officer, honestly, but mistakenly, believed that it was permissible
to identify the author of the letter and has 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,” Chairman John McFarlane said in the statement.
US law enforcement
In June, the board received a letter and a senior
executive another anonymous letter raising concerns about an employee recruited
by Barclays earlier that year. Amongst other issues, the letters raised
concerns of a personal nature about the senior employee, Staley’s knowledge of
and role in dealing with those issues at a previous employer.
Staley requested that the bank’s Group Information
Security team identify the author, yet was informed it was “not appropriate” to
do so. The following month, the CEO again asked the GIS team to unmask the
whistle-blower and this time received assistance from US law enforcement
agencies, according to Barclays’s statement.
The allegations in the letters relate to Tim Main, who
was hired in June as chairman of the bank’s global financial institutions
group, according to a person familiar with the case. Main joined from Evercore
Partners and previously worked under Staley at JPMorgan.
Other Barclays employees, in addition to Staley, are also
under probe for violating conduct, the person said.
Main didn’t immediately respond to an email and a
spokesman for Barclays declined to elaborate on the case. Patrick Burton, a
spokesman for JPMorgan in London, declined to comment.