Barclays has become caught up in the new investigation by global regulators into the potential manipulation of the £3tn-a-day currency markets, in the latest set back for bank as it attempts to cleanup in its reputation in the wake of the Libor rigging scandal.
As it published its third quarter results, Barclays confirmed it is also contesting a £50m penalty from the Financial Conduct Authority for behaving "recklessly" in the way it raised funds from Qatar to avoid a taxpayer bailout in 2008.
Antony Jenkins, promoted to chief executive amid the fallout of the June 2012 fine for Libor rigging, also used the results to outline a vision for more technology at the bank – which, it is suggested, could lead to 40,000 job cuts - and said that he was embarking a new review of the bank's 75 business lines to gauge the riskiness of the operations.
The bank was forced last month to tap shareholders for £6bn to bolster its financial strength. Jenkins said the new finance director Tushar Morzaria, who joined a fortnight ago, would measure the businesses to assess how much capital they are using.
In disclosing that it has received requests for information about its foreign exchange activities, Barclays is joining a number of other banks – including Royal Bank of Scotland, Deutsche Bank and UBS – in co-operating with the authorities and also shedding light on the nature of the investigation that includes regulators in the UK, the US and Asia.
Barclays said regulators were investigating foreign exchange trade trading "including possible attempts to manipulate certain benchmark currency exchange rates or engage in other activities that would benefit their trading positions".
"The investigations appear to involve multiple market participants in various countries. Barclays bank has received enquiries from certain of these authorities related to their particular investigations, is reviewing its foreign exchange trading covering a several-year period through August 2013 and is co-operating with the relevant authorities in their investigations," the bank said.
The investigations emerged after reports of allegations that traders at major banks were putting in client orders ahead of a 60-second window when benchmarks run by WM/Reuters – and used by fund managers to value their investments – are set.
The investigations are at an early stage and could be on the scale of the Libor scandal, in which Barclays was the first bank to fined, in June 2012, with a penalty of £290m. That led to the departure of its chief executive, Bob Diamond, and the Jenkins, who has embarked on a strategy to restore the reputation of the bank through his so-called transform programme.
The bank is in discussions with its shareholders about ways to avoid the cap on bonuses being introduced by the EU at the start of next year by introducing a new allowance for its highest paid staff. It said the closely-watched compensation to income ratio its investment bank – measuring what proportion of its income it was paying out to its staff – had risen to 41% from 40% and remains above its target of 35%.
Jenkins said his new team – as well as a new finance director, he has a new retail head and bosses of the investment bank – needed to push harder in the final quarter of the year and into 2014.
After being forced into the cash call by the Bank of England, Jenkins said the bank was continuing to "reassess the balance sheet for further leverage reduction opportunities consistent with preserving our strong franchises, supporting lending to the UK economy".
When he took the helm he had originally assessed 75 business lines in terms of reputation risks and said he would withdraw from some businesses. The investment bank – the traditional powerhouse of the business and once known as Barclays Capital – took hit to income as a result and also suffered a fall in its fixed-income trading. Third quarter profits in the investment bank fell 53% to £463m although the bank did not disclose any reduction caused by shutting down the controversial tax planning department known as structured capital markets.
Overall, in the third quarter profits fell to £1.4bn from £1.9bn as losses in continental Europe widened. In the first nine months of the year, Barclays' profits rose to £2.8bn from £962m, although this included the cost of buying its back its own debt. The shares rose 3.5% to 274p in early trading.
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