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Barclays Hit By £38 Million Fine For Client Asset Failings

Stephen Little, Reporter, London, 23 September 2014

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Barclays has been fined a record £37.7 million($61.8 million) by the UK Financial Conduct Authority for failing to properly protect clients’ custody assets and is the latest setback for the bank following the LIBOR scandal in 2012.

Barclays has been fined a record £37.7 million ($61.8 million) by the Financial Conduct Authority for failing to properly protect clients’ custody assets and is the latest setback for the bank following the LIBOR scandal in 2012.

The FCA said in a statement that the bank’s investment arm had failed to protect client assets worth £16.5 billion between November 2007 and January 2012.

It is the highest fine ever imposed by the regulator or its predecessor the Financial Services Authority for client assets breaches.

The regulator said “significant weaknesses” in the systems and controls in Barclays’ investment banking division meant clients risked incurring extra costs, lengthy delays or losing their assets if the bank had become insolvent. Barclays did not profit from the issue and no customers lost out.

It is the second time Barclays has been fined for client asset breaches, after receiving a £1.1 million penalty in 2011 for similar misconduct relating to client money.

“Barclays 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,” said Tracey McDermott, the FCA’s director of enforcement and financial crime.

The FCA and FSA have previously imposed 16 fines for misconduct relating to client assets or client money. Other firms that have been fined for similar offences include, Aberdeen Asset Management, Blackrock, Rowan Dartington and JPMorgan.

Barclays acknowledged it had fallen short of what was expected and accepted the FCA’s conclusion.

“Barclays has subsequently enhanced its systems to resolve these issues and to ensure we have the requisite processes in place. No client has suffered any loss as a consequence of this weakness in our processes which existed prior to January 2012,” a spokesperson for Barclays said.

The news follows yesterday’s announcement by Barclays that it had appointed Akshaya Bhargava as the new chief executive of wealth and investment management, taking up the role on 13 October and filling a slot left by the departure of Peter Horrell.

The punishment comes on top of what have been a torrid few years for the bank which has seen it rocked by a number of scandals. In 2012, Barclays was fined $450 million by US and UK regulators for trying to manipulate LIBOR, which led to the resignations of Barclays chief executive Bob Diamond and chairman Marcus Agius in the UK.

The bank is currently undergoing major restructuring and in May announced plans to shed 19,000 jobs, including 7,000 in its investment arm.

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