FCA investigates Barclays boss Jes Staley: Here’s how four City analysts reacted
Confusion reigned in the City this morning, after the Financial Conduct Authority (FCA) said it was investigating Barclays chief executive Jes Staley over his attempt to identify a whistleblower at the bank.
It was reported that Staley may even lose a hefty chunk of his bonus as a result.
Investors weren’t sure what to make of the highly unusual news, with shares falling one per cent before creeping out of the red in later trading. Here’s how City analysts reacted:
1. A very significant embarrassment
“Given Barclays’ history of regulatory misdemeanours, most notably the high profile investigation into Libor rigging which led to former CEO Bob Diamond’s departure from the group, this latest revelation represents a very significant embarrassment for the board as it tries to rebuild the group’s reputation. As for Mr Staley, it remains to be seen whether the PRA and FCA come to the same conclusion as the board in allowing him to remain in his post, although we would assume that the sanctions proposed will have already been discussed with the regulators and should therefore help to mitigate this risk. It is possible the group may also be fined.
“Operationally, we believe that Barclays has made excellent progress under the stewardship of Jes Staley, notably in respect of running off non-core assets and rebuilding the capital base. To remove Mr Staley from his role at this juncture would be damaging to further operational progress, with an improvement in return on equity now the key area of focus. While Mr Staley’s reputation has undoubtedly taken a serious knock, we believe that it remains in the best interests of shareholders to keep him in the post of CEO and hence we recommend that they follow the board’s direction and vote in favour of his reappointment at the AGM in May.”
– Gary Greenwood, Shore Capital Markets
2. Not a major setback
“Whistleblowing programmes like this are in place so there is some oversight into banking operations post-2008.
“10 years after the financial crisis, this does seem to be a setback for banks in terms of how they oversee management, and a little bit of a step back in terms of how management have been operating, how much they’ve been complying with these new rules.
“However, we’ve seen very little market reaction this morning. We’ve seen a bit of a bounceback [from this morning’s lows]. The full compliance from Staley could be helping to allay fears – this could be seen as a big turnaround in the bank. Barclays issuing a statement may also have helped. It doesn’t seem as thought his job is on the line.”
– Henry Croft, Accendo Markets
3. Investors aren’t perturbed
“While Monday morning has been an unpleasant one for Barclays’ chief Jes Staley, investors don’t appear to be too perturbed by his bad behaviour, the banking stock just about edging into the green. If the FCA/PRA investigation throws up anything else unpleasant than it may come to affect Barclays’ price; for now, however, the story’s impact has been contained to Staley’s wage packet, its prominence arguably due to a lack of other economic news.”
– Connor Campbell, Spreadex
4. Shares rising doesn’t mean this is good news
“I don’t think [shares rising are] a reflection of the market thinking this is good news. The reality in terms of the material effect it’s going to have on Barclays’ revenues is not significant, which is why shares haven’t reacted. Potentially there could be some sort of slap on the wrist, but in context of the money Barclays makes and fines like PPI, it’s not going to be a significant amount for Barclays to be able to pay.
“However, there’s certainly a large amount of embarrassment involved, particularly because its chief executive is involved.
“Episodes like this don’t help to promote the idea that all of that bad behaviour is in the past. A lot of it is, but the reality is that financial regulation is very complex, which is why the banks have very large compliance departments.
“I wouldn’t necessarily expect Staley to know the ins and outs of every single financial regulation, but you would expect him to rely on his compliance department to guide him in terms of what’s possible and what will land Barclays in trouble with regulators, and it doesn’t look like that happened here.”
– Laith Khalaf, Hargreaves Lansdown
5. Staley has been lucky
“What was Staley thinking? I can understand him asking first and being told it was not appropriate, but having heard that and trying again rather calls into question his judgement. I think he’s lucky to get away with what will be a fine. You’ve really got to question his judgement. I don’t care what his motives are.
“Given the financial crisis and the fact whistleblowers were ignored, you really don’t want to discourage them. You’ve also got to generate an atmosphere where people feel confident to come forward without management going after them. Has Barclays struck an appropriate tone in this case? Staley has been lucky. I’d suggest he needs to tread carefully.”
– Michael Hewson, CMC Markets
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