Barclays has once again hit headlines for the wrong reasons, after it emerged it has been fined £38m by the Financial Conduct Authority for failing to protect some £16.5bn of client assets.
The final notice, published today (23 September), revealed that Barclays had breached FCA principles in relation to management and control and clients assets between 1 November 2007 and 24 January 2012.
The FCA’s investigation identified 95 external accounts where it was in breach of the regulator’s rules. It stated there were no actual losses resulting from the bank’s breaches.
Of the 95 accounts, 61 held affiliates’ assets worth £13.5bn, 33 held £2.7bn of affiliates’ clients’ assets and one account held Barclay’s own clients’ safe custody assets, worth approximately £300m.
The FCA found the failings, which only occurred within Barclays’ investment banking division, arose from “significant weaknesses” in its systems and controls and a historical focus on business lines and products.
For three years, Barclays failed to make adequate arrangement to protect clients’ ownership rights and failed to ensure adequate protection for the safe custody assets.
Necessary legal agreements were not in place for over half of the 61 accounts holding affiliates’ assets until after September 2010 and were not in place for any of the 33 accounts holding affiliates’ clients’ safe custody assets until September 2011.
The regulator also found that not all the accounts were appropriately named, did not maintain records to ensure how the safe custody assets were held, and did not conduct its own “internal and external reconciliations” in relation to those accounts.
The final notice said there was no record in Barclays’ “own sub-ledgers of the fact that it held the assets and often no written agreement setting out the basis on which the assets were held”. As a consequence of its failings, Barclays submitted incomplete and inaccurate returns to the FCA.
The regulator said it did not believe that Barclays acted deliberately or recklessly and when the breaches were discovered, it immediately reported them to the regulator. The FCA also said that although safe custody assets were at risk, there was no actual loss of any assets.
The findings were revealed when Barclays sought and received external professional advice which identified that, for any account where it did not hold its own books and records or conduct reconciliations, it was in breach of Cass.
Barclays agreed to settle at an early stage of the FCA’s investigation and therefore qualified for a 30 per cent discount. Were it not for this discount, the Authority would have imposed a financial penalty of £54m.
The bank has been hit with a number of fines in the past two years, including a then record £59.5m from the UK regulator as part of a £290m package in 2012 over manipulation of interbank rates, and a £26m earlier this year for failure to manage conflicts of interest over a nine-year period.
