Following investigations by the U.K. financial regulators, Barclays bank chief Jes Staley gets to keep his job but faces a significant fine—as well as a cut from his bonus—after admitting using bank staff to try to reveal a whistleblower’s identity.
One year and 10 days after the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) began their investigation into Staley’s conduct, Barclays announced on 20 April that the bank’s CEO will likely face a fine from regulators for trying to uncover a whistleblower.
In a statement, Barclays said that regulators have sent Staley confidential draft warning notices setting out their reasons for proposing enforcement actions.
The FCA and PRA allege that Staley’s attempt to unmask an anonymous whistleblower breached Individual Conduct Rule 2 of the FCA Handbook and that the CEO had therefore failed to “act with due skill, care, and diligence.” They have proposed that Staley should pay an unspecified financial penalty.
An FCA spokesperson says that such fines are “unlimited” in scope and are calculated in terms of factors, including the seriousness of the breach of conduct, how long the misconduct went on for, and the impact of the actual harm caused.
The FCA introduced new whistleblowing rules in 2016 to encourage better incident reporting. A spokesperson says that the regulator takes Staley’s misconduct “very seriously.”
It is highly unusual for regulators to investigate and censure the boss of a major bank—the FCA could not name a similar case—but a ban for the head of one of the world’s biggest financial institutions was never likely. In a statement issued jointly, the regulators said: “The FCA and the PRA have now concluded investigations into the CEO of Barclays and Barclays Bank plc. We have issued draft warning notices in respect to the CEO and will announce the outcome once this issue has reached a conclusion.”
“I am personally very disappointed and apologetic that this situation has occurred.”
John McFarlane, Chairman, Barclays
While Staley has been reprimanded, the FCA and PRA do not allege that he acted with a lack of integrity, or that he lacks fitness and propriety to continue to perform his role as CEO. He also has the right to review the draft warning notices, and “make representations”—or revisions—as to their content within 28 days. If Staley continues to object to the facts reported in the notice after 28 days, he can appeal to the Upper Tribunal, though any resolution “may take a long time,” according to an FCA spokesperson.
Barclays’ board says that it continues to have “unanimous confidence” in its CEO and recommends his re-election at the bank’s AGM on 1 May 2018. The bank warned in April last year, however, that it will deduct an unspecified—but “very significant”—chunk from Staley’s compensation package once the FCA and PRA processes have concluded.
How we got here
In July 2016, Staley tried to identify the author of two anonymous letters sent to the board the previous month, which raised concerns about the recruitment of Tim Main, a friend and former colleague of Staley’s from his days at JP Morgan. Main had been appointed as head of the bank’s financial institutions group in New York. The board treated this author as a whistleblower, and the letters were logged by the bank’s group compliance function as such and investigated.
Staley was given a copy of the first letter and made aware of the second. He considered both letters unfair personal attacks on Main. He then tried to hunt down the author, using the bank’s information security team, which contacted and received assistance from a U.S. law enforcement agency (though to no avail). In an internal e-mail sent to Barclays staff and seen by The Guardian, he accused the letter writer of harassment, pursuing a personal attack, and of trying to “maliciously smear” Main.
Staley’s attempts to identify the author first came to the attention of the Barclays board in early 2017. The board instructed law firm Simmons & Simmons to conduct a focussed investigation into the matter, led by Sir Gerry Grimstone, the bank’s deputy chairman. It also notified the FCA, PRA, and other relevant authorities about Staley’s conduct.
Chairman John McFarlane said at the time: “I am personally very disappointed and apologetic that this situation has occurred.”
The investigation found—and the board accepted—that Staley “honestly, but mistakenly” believed that it was permissible to identify the author. The board concluded that Staley had, however, “made an error in becoming involved with, and not applying appropriate governance around, the matter, and in taking action to attempt to identify the author of the letter,” whose identity is still unknown.
Staley said in the April 2017 statement: “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.”
Barclays has also escaped serious censure, with neither the PRA nor the FCA feeling that any enforcement action is necessary following their investigations into the bank’s whistleblowing procedures. Instead, they have proposed that the bank’s global and U.K. arms will be subject to additional requirements to report to the FCA and PRA on certain aspects of their whistleblowing programmes.
Barclays has already taken steps to improve its whistleblowing procedures. In May 2017—one month after regulators began their investigation into Staley and the bank—it set up its own independent reviews of its whistleblowing policies, processes, and controls and has made some necessary tweaks to enhance it. U.S. authorities, however, are still investigating the incident, and Barclays “continues to provide information to, and cooperate with, authorities in the U.S. with respect to this matter.”
Staley is a veteran U.S. banker and took the helm at Barclays in December 2015. He pledged to overhaul its culture, which had been in the spotlight due to the bank’s involvement in rigging both the Libor and Forex interest rates, the latter resulting in a £285 million fine (U.S. $398 million) from the FCA in May 2015—the largest the regulator had ever imposed.
Staley was supposed to be in charge of cleaning up Barclays, but his brush with U.K. regulators, as well as the Serious Fraud Office’s (SFO) decision in February to charge the bank for providing unlawful financial assistance to a group of well-placed Qatari investors (four former executives, including former CEO John Varley, face fraud charges over the scheme) is not doing much to restore the bank’s reputation.
Following its statement issued on 10 April 2017, the bank said that it was continuing “to review the position of other employees involved in this matter.” A Barclays spokesperson declined to say whether this investigation was still ongoing, however, or if any other employees have been disciplined.