Relief at Barclays over Jes Staley as regulators show teeth

(c) Sky News 2018: <a href="http://news.sky.com/story/relief-at-barclays-over-jes-staley-as-regulators-show-teeth-11338959">Relief at Barclays over Jes Staley as regulators show teeth</a>
 

There will be a profound sense of relief at Barclays (LSE: BARC.L - news) that Jes Staley, its chief executive, has not lost his job as a result of his attempts to unmask a whistleblower.

For under the so-called "senior managers" regime, introduced after the financial crisis to make those running banks more accountable for failings on their watch, a case for him to have been banned could have been constructed.

Moreover, as this was the first major test of the regime, there was an immense amount of pressure on the two regulators involved here, the Financial Conduct Authority and the Prudential Regulation Authority, to show the new setup has teeth.

With (Other OTC: WWTH - news) no bankers having gone to prison following the financial crisis, the public perception is that the big bosses somehow get away with misdemeanours, while the little guys - as in the Libor-rigging cases - go down .

The regulators also needed to prove that whistleblowers in financial services institutions will be protected - something that has not always been the case in the past. Confidence in the new post-crisis regulatory system needed to be maintained.

Yet there cannot have been much appetite, either at the FCA's headquarters at Canary Wharf or the PRA's on Moorgate, to ban Mr Staley.

Barclays, in the jargon, is a systemically-important financial institution - a financial institution whose failure might trigger a financial crisis.

It is also an organisation that, while not requiring a taxpayer rescue during the crisis like Royal Bank of Scotland (LSE: RBS.L - news) and Lloyds Banking Group, has endured an immense amount of turmoil during the last decade.

Mr Staley's immediate predecessor, Antony Jenkins, was pushed overboard when the Barclays board decided he was not making sufficient progress.

Mr Staley's predecessor-but-one, Bob Diamond, was forced to step down at the insistence of the former Bank of England Governor, Lord King, after Barclays admitted its role in Libor-rigging in 2012.

Mr Diamond's immediate predecessor, John Varley, has been charged with conspiracy to commit fraud and providing unlawful financial assistance in relation to the bank's emergency fund-raising in November 2008.

He and three other former Barclays executives face prison if convicted.

With Barclays having had three chief executives during the last six years, each of whose strategies have contradicted those of their predecessor, regulators will have been reluctant to insist on yet another change at the top.

Getting rid of Mr Staley would have caused immense disruption in the bank and, in all probability, resulted in a lot of the senior staff recruited by him leaving as well.

Added to this is the sense that Mr Staley is doing a good job and that it would have been very hard to find an adequate replacement for him.

That is why it has taken more than a year for the investigation to take its course . The regulators were on the horns of a particularly nasty dilemma.

The decision they have reached today is hugely pragmatic.

The regulators will hope a heavy fine on Mr Staley, as yet to be determined, will demonstrate that the senior managers regime has real force. They can point out just how rare it is for a CEO to be fined and censured in this way.

The Barclays board meanwhile, having already said it will cut the pay of its chief executive by a "very significant" amount, avoids the disruption and turmoil that would have come with replacing Mr Staley.

Longer term, there may be a sense that the bank's luck has turned. Its latest results point to real progress being made.

And, at the end of March, Barclays struck a deal with US regulators to pay a $2bn settlement for the mis-selling of mortgage-backed securities during the run-up to the financial crisis - substantially less than had been expected.

Barclays is not out of the woods, as US regulators may yet punish Mr Staley over this incident, while further embarrassment and reputational hits may emerge in Mr Varley's trial.

However, for the first time in a long while, it feels as though things may be going the bank's way.

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