Barclays PLC Fined $62M For Putting Clients’ Assets At Risk

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Barclays PLC Fined $62M For Putting Clients’ Assets At Risk

Barclays PLC (NYSE:BCS) (LON:BARC) has been fined a record $63 million (£38 million) by a British regulator for failing to properly safeguard client assets at its investment bank. Barclays, however, said it didn’t profit from the issue and no customers lost out.

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Barclays’ weakness in systems and controls

According to the U.K. Financial Conduct Authority, Barclays failed to appropriately segregate billions of pounds in client assets, thereby exposing them to risk if the bank ever became insolvent. The regulator said Barclays’ investment bank failed to identify in its records which entity in the investment bank was responsible for which account or to whom those accounts belonged.

The FCA said the activity represented “significant weaknesses” in the systems and controls at the investment bank from November 2007 to January 2012. The misconduct involved £16.5 billion in assets held by Barclays PLC (NYSE:BCS) (LON:BARC)’s clients in 95 custodial accounts in 21 countries.

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A spokesman for Barclays said the bank has subsequently enhanced its systems to resolve these issues and to ensure that the bank has the requisite processes in place. He emphasized that no client has suffered any loss as a consequence of this weakness in the processes which existed prior to January 2012.

Lessons not learned

Expressing concern over the weakness in the system, the FCA said if Barclays PLC (NYSE:BCS) (LON:BARC) had become insolvent in that period, it is likely that a court would have had to step in before clients could get their assets back. This is a prospect that has worried bank clients and regulators since the 2008 collapse of Lehman Brothers sparked a messy tussle over client holdings that hadn’t been adequately segregated by the bank.

The FCA’s director of enforcement and financial crime, Tracey McDermott, said: “Barclays PLC (NYSE:BCS) (LON:BARC) failed to apply the lessons from our previous enforcement actions, numerous industry-wide warnings, and exposed its clients to unnecessary risk. All firms should be clear after Lehman that there is no excuse for failing to safeguard client assets.”

In May, the U.K.’s top financial watchdog fined Barclays $43.8 million for failing to adequately manage conflicts of interest between itself and its customers.

The latest fine from the FCA is only the latest for Barclays as it battles with a host of litigation and investigations into alleged wrongdoings at the bank. The following table captures some of Barclays’ recent penalties, including a £1.13 million fine at the bank’s securities division in January 2011 for having mixed millions of pounds of client money with the unit’s own funds.

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Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports
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