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Barclays faces further regulatory scrutiny as it braces for US fine Barclays faces further regulatory scrutiny as it braces for US fine
(about 7 hours later)
Barclays is facing further scrutiny by regulators, the embattled bank warned on Wednesday, as it braced for a fine from the American authorities for the way it has traded electricity contracts in the western US. Barclays took another hit to its battered reputation by revealing US regulators are investigating its 2008 crucial fund raising and preparing to issue fines for allegedly trying to manipulate electricity prices in California.
As the bank admitted it had slumped to a third-quarter loss as a result of the payment protection insurance scandal, it revealed that US regulators were now looking at the crucial fundraising in 2008 from Middle Eastern investors that is also being investigated by the Financial Services Authority. As the embattled bank admitted it had slumped to a third-quarter loss as a result of the payment protection insurance scandal, it revealed that US regulators are now looking at the crucial fundraising from Middle Eastern investors that saved the bank from a government bailout at the time of the banking meltdown. That deal is also being investigated by the Financial Services Authority and the Serious Fraud Office.
Antony Jenkins, promoted to chief executive after Bob Diamond left in the wake of the Libor-rigging scandal, insisted the bank would "vigorously defend" itself against the potential fine from the United States Federal Energy Regulatory Commission (FERC) office of enforcement which could be announced later on Wednesday. Antony Jenkins, promoted to chief executive after Bob Diamond left in the wake of the Libor-rigging scandal, insisted the bank would "vigorously defend" itself against potential penalties for its electricity trading activities from the United States Federal Energy Regulatory Commission (FERC) office of enforcement which are expected to be announced imminently.
The matter relates to Barclays' power trading in the western US from late 2006 to 2008 and is thought to relate to the way electricity was traded. The regulator has been investigating Barclays' power trading in the western US from late 2006 to 2008.
On a day when the broader FTSE 100 was flat, Barclays was one of the biggest fallers in the main index in early trading, with shares down 4.5% at 228p. Barclays was one of the biggest fallers in the FTSE 100 index, ending almost 5% lower at 227p after the new investigations were announced and after the performance of of the investment bank disappointed some analysts.
The FSA is also analysing disclosures the bank made about its crucial fundraisings in 2008 and the US authorities – the department of justice and US Securities and Exchange Commission (SEC) – are now investigating whether these fundraisings were "compliant" with the US Foreign Corrupt Practices Act. Barclays said it was "fully co-operating" with the two regulators. The bank admitted in July that its finance director, Chris Lucas, and three others were being investigated by the FSA for two fundraisings that took place to help the bank avoid a bailout by the taxpayer in 2008. The FSA is already analysing disclosures the bank made about its 2008 fundraisings and the US authorities – the Department of Justice and US Securities and Exchange Commission (SEC) – are now investigating whether these fundraisings were "compliant" with the US Foreign Corrupt Practices Act. Barclays said it was "fully co-operating" with the two regulators. The bank admitted in July that its finance director, Chris Lucas, and three others were being investigated by the FSA for two fundraisings that took place to help the bank avoid a bailout by the taxpayer in 2008 and has since admitted the SFO is investigating.
The latest admissions by the bank come in a week in which a high court judge has ruled that Diamond and other bankers should be hauled before the court to explain what they knew about Libor rigging in a case brought by Guardian Care Homes which is largely about the mis-selling of interest rate swaps.The latest admissions by the bank come in a week in which a high court judge has ruled that Diamond and other bankers should be hauled before the court to explain what they knew about Libor rigging in a case brought by Guardian Care Homes which is largely about the mis-selling of interest rate swaps.
Jenkins, presenting his first set of results since replacing Diamond at the start of September, refused to reveal how many Barclays staff had been fired, suspended or disciplined as a result of the alleged manipulation of Libor. But, he said, "rest assured" that bonuses had been clawed back from the individuals involved. However, he did not go so far as to say whether this included Diamond and Jerry del Missier, the chief operating officer who also quit after a record £290m fine was imposed on Barclays.Jenkins, presenting his first set of results since replacing Diamond at the start of September, refused to reveal how many Barclays staff had been fired, suspended or disciplined as a result of the alleged manipulation of Libor. But, he said, "rest assured" that bonuses had been clawed back from the individuals involved. However, he did not go so far as to say whether this included Diamond and Jerry del Missier, the chief operating officer who also quit after a record £290m fine was imposed on Barclays.
In the third quarter the bank slumped to a £47m loss, which had been expected after the bank stunned the City earlier this month by setting aside another £700m to cover the cost of PPI mis-selling claims, taking its bill to £2bn. Over the nine months to the end of September, profits were down 86% to £712m as a result of the PPI charge and the fluctuations in the cost of buying back its own debt, which has led to a £4bn charge. Stripping these out, the bank focused on an 18% rise in adjusted profits to £6bn. A year ago, profits were £5bn over the same period and in the third quarter reached £2.4bn – although stripping out a gain on the value of its own debt and other one-off items, this fell to £1.3bn. In the third quarter the bank slumped to a £47m loss, which had been expected after the bank stunned the City earlier this month by setting aside another £700m to cover the cost of PPI mis-selling claims, taking its bill to £2bn. Over the nine months to the end of September, profits were down 86% to £712m as a result of the PPI charge and the fluctuations in the cost of buying back its own debt, which has led to a £4bn charge.
Jenkins defended the performance of the investment bank, known as Barclays Capital until a rebranding exercise, which reported a slowdown in the third quarter when rivals were stronger. Even so, the investment bank continued to generate the bulk of the profit, generating £3.2bn in the first nine months, up 19%, while the retail and business banking business which Jenkins ran until his promotion, suffered a 5% slump in profits to £1.4bn. The corporate bank slumped to a £6m loss. Jenkins defended the performance of the investment bank, known as Barclays Capital until a rebranding exercise, which reported a slowdown in the third quarter when rivals were stronger. Even so, the investment bank continued to generate the bulk of the profit, generating £3.2bn in the first nine months, up 19%, while the retail and business banking business which Jenkins ran until his promotion, suffered a 5% slump in profits to £1.4bn.
The new chief executive also insisted the bank was responding to public and shareholder pressure to reduce bonuses in the investment bank. A year ago, it put aside 46% of revenue generated to pay bonuses. So far this year, this has fallen to 39%. "We don't intend to stop there [and will] drive that ratio down over time," Jenkins said. Analysts at UBS said that "short-term share price movements" would be influenced by the disclosure of the new regulatory investigations and the slightly more sober outlook statement. The performance of the investment bank disappointed Gary Greenwood, banks analyst at Shore Capital, who said that "total income in the investment bank fell short of market expectations, following a strong showing elsewhere in the industry"
Early reaction from analysts highlighted the investment bank's performance. Gary Greenwood, banks analyst at Shore Capital, said: "We were disappointed to find that total income in the investment bank fell short of market expectations, following a strong showing elsewhere in the industry, albeit we note that Barclays has historically shown less total income volatility than its peers."