Barclays’ reputation took another battering on Wednesday when a US regulator imposed a $150m fine on the bank for the way it treated its foreign exchange customers.
The New York Department of Financial Services (NYDFS) released a cache of emails to support its finding against Barclays, including one in which a managing director tells staff to “obfuscate and stonewall” if asked questions about the currency trades.
The penalty, which also requires Barclays to fire an unnamed senior individual involved in its electronic global foreign exchange trading business, is related to a computer system the bank devised to reject orders from customers that would not be profitable.
The system, known as Last Look, operated by introducing a hold period between a customer order being received and it being executed by Barclays. It allowed the bank to root out trades where the price had moved against them, often in just milliseconds.
Customers – who were sophisticated users such as hedge funds – would receive messages saying “NACK” (not acknowledged). One customer questioned the receipt of 300 such messages on one day in December 2010 but did not receive a response.
Anthony Albanese, the regulator’s acting superintendent of financial services, said: “This case highlights the need for greater oversight and action to help prevent the misuse of automated, electronic trading platforms on Wall Street, which is a wider industry issue that requires serious additional scrutiny.”
The fine is a reminder of the reputational issues still facing the bank in the wake of the 2012 fine for rigging Libor, which sparked a wave of recriminations against Barclays and the entire industry. It also comes just two weeks before the bank’s new chief executive, Jes Staley, takes on his £8m-a-year role. When his appointment was announced last month Staley, a US banker, said: “I feel keenly we must continue to strengthen trust in Barclays.”
It is the second NYDFS fine imposed on Barclays for foreign-exchange-related matters this year and takes the total paid by the bank to the New York regulator to $635m. The first was part of a £1.5bn fine on Barclays announced in May, when regulators in the US and UK announced record-breaking fines for manipulating foreign exchange markets.
The risk of ongoing fines for banks was raised by ratings agency Moody’s in a report this week that put Barclays, HSBC and Royal Bank of Scotland at high risk of further penalties. Moody’s calculated that 15 major banks had set aside £144bn to pay legal costs and settle fines and compensation since the onset of the 2008 banking crisis.
Barclays admitted it faced further penalties. It said it “continues to co-operate with other ongoing investigations and to manage related litigation risks as previously disclosed”.
The NYDFS said the problems with Last Look took place on certain occasions between 2009 and 2014. The regulator added that Barclays had made changes to the system in September and October 2014 as result of the broader investigation into foreign exchange market rigging, but that 7% of the activity pushed through the trading platform had continued to benefit Barclays until August 2015.
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