March 28, 2024

DealBook: Barclays Sets Aside $1.6 Billion More for Legal Costs

A Barclays branch in London.Andy Rain/European Pressphoto AgencyA Barclays branch in London.

8:01 a.m. | Updated

LONDON – Barclays said on Tuesday that it had set aside an additional £1 billion ($1.6 billion) to cover legal costs related to its inappropriate selling of complex financial products to customers.

The announcement came as British politicians grilled senior Barclays executives, including the firm’s new chief Antony P. Jenkins, about the culture and past failures at the British bank.

Mr. Jenkins and the firm’s chairman, David Walker, told politicians on Tuesday that they were prioritizing ethics and reducing risky trading activity, adding that they would take responsibility if future problems were discovered at the bank.

The Barclays’ chief, who agreed to forgo his bonus in response to the series of scandals that have hit Barclays in recent years, said he would resign if another scandal was uncovered while he was leading the bank.

“The chief executive is responsible for what happens during their tenure and when incidents happen the price needs to be paid and I believe were I to find myself in that position I would do the right thing,” Mr. Jenkins said on Tuesday.

When politicians asked Mr. Jenkins if he was eradicating the culture that he inherited from his predecessor Robert E. Diamond Jr., Barclays’ new chief said he was indeed “shredding that legacy” of sometimes being “too self-centered and too aggressive.”

Barclays was the first to reach a settlement with American and British authorities last year related to the manipulation of the London interbank offered rate, or Libor. The benchmark rate underpins trillions of dollars worth of financial products worldwide, including complex derivatives and mortgages.

In its latest move to address past indiscretions, Barclays said on Tuesday it had set aside an additional £600 million for the inappropriate selling of loan insurance to consumers. In total, the bank has now made provisions of £2.6 billion to compensate affected customers, of which it had returned £1.6 billion by the end of last year, according to a statement from Barclays.

Other larger British banks, including HSBC, Royal Bank of Scotland and the Lloyds Banking Group, have all been forced to repay customers for inappropriately selling them insurance. Many customers were unaware they had been sold the financial products when they took out mortgages and loans, while others have struggled to make claims on the policies.

Barclays also said on Tuesday that it had set aside an additional £400 million for legal costs related to the sale of certain interest-rate hedging products to small businesses in Britain. Barclays now has made provisions totaling £850 million to compensate customers of these products, of which only £36 million had been paid out by the end of 2012.

Barclays is not the only British bank to face new legal problems because of the hedging products.

Last week, the Financial Services Authority, the country’s financial regulator, demanded that local financial institutions review all sales of such products after authorities found that more than 90 percent of a sample group of the instruments were sold improperly.

Barclays has been trying to rebuild its reputation since several of its senior executives, including Mr. Diamond, resigned in the wake of the Libor scandal last year.

The bank is to announce a major restructuring of its business units when it reports earnings on Feb. 12; steps could include the elimination of around 2,000 jobs in the firm’s investment banking division.

On Sunday, the bank’s chief financial officer, Christopher G. Lucas, and its general counsel, Mark Harding, said they would resign. Mr. Lucas is one of four current and former executives who are under investigation in connection with how Barclays tapped Qatari investors for new capital during the financial crisis.

The British bank said on Tuesday that it had appointed Diane de Saint Victor, currently general counsel of the Swiss engineering company ABB, as a new nonexecutive director.

Some of the British politicians, however, remained skeptical that Barclays would be able to overcome the series of lawbreaking that has been announced in recent months.

“It doesn’t really matter what the scandal is, Barclays seems to have a finger in it,” said Andrew Tyrie, a British lawmaker who is overseeing the parliamentary commission on banking standards, which is investigating misconduct in the country’s financial services sector.

Article source: http://dealbook.nytimes.com/2013/02/05/barclays-sets-aside-extra-1-6-billion-for-legal-costs/?partner=rss&emc=rss

DealBook: Barclays’ Ex-Chief Robert Diamond Defends Testimony to Parliament

Robert E. Diamond Jr., Barclays' former chief, testified to lawmakers last week about the bank's interest-rate manipulation scandal.Pool photograph by Agence France-PresseRobert E. Diamond Jr., Barclays‘ former chief, testified to lawmakers last week about the bank’s interest-rate manipulation scandal.

LONDON — Robert E. Diamond Jr., the former chief of Barclays who resigned because of a scandal involving interest rate manipulation, defended his testimony to a British parliamentary committee as lawmakers called more senior officials to appear.

Late Tuesday, Mr. Diamond responded to criticism from British politicians that he had not been completely forthcoming last week at a hearing on the Barclays case.

“Any such suggestion would be totally unfair and unfounded,” Mr. Diamond wrote in a letter to Andrew Tyrie, the committee’s chairman. “The comments made at today’s hearing have had a terribly unfair impact upon my reputation.”

Mr. Diamond said that he would be willing to discuss the issue with lawmakers. A number of committee members have called for him to give more testimony.

However, there may not be time. The committee has one week before it recesses for the summer, and other officials have already been slated to give testimony on Monday.

That list includes top executives from the Financial Services Authority, including the regulator’s chairman, Adair Turner; Andrew Bailey, the head of the prudential business unit; and Tracey McDermott, the acting head of the enforcement and financial crime division. Jerry del Missier, a senior Barclays official who resigned last week, is also set to appear.

The committee is investigating the manipulation of the London interbank offered rate, or Libor. The rate underpins trillions of dollars of financial products, including mortgages, student loans and complex derivatives.

In late June, Barclays agreed to pay $450 million to British and American authorities to settle claims that it submitted bogus rates to deflect concerns about its health and improve profits.

Politicians in Washington and London are questioning whether officials did enough to avoid the scandal.

The New York Fed said on Tuesday that it had received “occasional anecdotal reports from Barclays of problems with Libor” as far back as late 2007. Barclays has said that it had informed American and British regulators about concerns with the rate, but officials did not address the problems.

On Tuesday, members of the parliamentary committee focused their anger on Marcus Agius, Barclays’ chairman, asking him about the actions of Mr. Diamond and the culture inside the bank.

Questions centered on two letters to Barclays from British regulators who raised questions about Mr. Diamond’s management style. Some concerns dated to his appointment to the bank’s top spot in late 2010.

During his testimony last week, Mr. Diamond said the bank had maintained a good relationship with the Financial Services Authority, adding that he did not recall that the regulator had questioned the bank’s activities or its internal culture.

On Tuesday, members of the committee asked Mr. Agius about Mr. Diamond’s testimony.

“Would you say that Mr. Diamond lied to this committee?” David Ruffley, a member of Parliament, asked Mr. Agius.

“I can’t comment on Mr. Diamond’s testimony,” Mr. Agius said.

Diamond Letter to Tyrie

Article source: http://dealbook.nytimes.com/2012/07/11/more-officials-called-to-testify-on-libor-scandal/?partner=rss&emc=rss

DealBook: More Officials to Testify as Diamond Defends His Actions

Robert E. Diamond Jr., Barclays' former chief, testified to lawmakers last week about the bank's interest-rate manipulation scandal.Pool photograph by Agence France-PresseRobert E. Diamond Jr., Barclays’ former chief, testified to lawmakers last week about the bank’s interest-rate manipulation scandal.

LONDON – Robert E. Diamond Jr., Barclays‘ former chief, defended his testimony as the list of senior officials set to appear before Parliament about the Barclays interest rate manipulation scandal is getting longer.

Top executives from the Financial Services Authority, the British regulator, and Jerry del Missier, a senior Barclays official who resigned because of the scandal, are to testify on Monday before a British parliamentary committee.

The regulators to testify include Adair Turner, chairman of the Financial Services Authority; Andrew Bailey, the head of its prudential business unit; and Tracey McDermott, the acting head of the regulator’s enforcement and financial crime division.

The move to question the senior British officials and Mr. del Missier comes after Robert E. Diamond Jr., the former head of Barclays, and Marcus Agius, its chairman, both testified before the committee.

On Tuesday, British lawmakers focused their anger on Mr. Agius, who was peppered with questions about the actions of Mr. Diamond and the culture inside the bank.

Their questions were centered on two letters that were sent by British regulators that raised questions about Mr. Diamond’s management style. Some of the concerns dated back to his appointment to the bank’s top spot in late 2010.

During his testimony last week, Mr. Diamond said the bank had maintained a good relationship with the Financial Services Authority, adding that he did not recall that the regulator had raised concerns about the bank’s activities or its internal culture.

The British politicians asked Mr. Agius whether Mr. Diamond had been completely forthcoming in his testimony.

“Would you say that Mr. Diamond lied to this committee?” David Ruffley, a member of Parliament, asked Mr. Agius.

“I can’t comment on Mr. Diamond’s testimony,” Mr. Agius replied.

In response, Mr. Diamond wrote to Andrew Tyrie, the committee’s chairman, late on Tuesday, saying he was “dismayed” that some of the politicians apparently believed he had been less than candid.

“Any such suggestion would be totally unfair and unfounded,” Mr. Diamond wrote, adding that he would be willing to discuss the issue with the British lawmakers. “The comments made at today’s hearing have had a terribly unfair impact upon my reputation.”

Diamond Letter to Tyrie

Article source: http://dealbook.nytimes.com/2012/07/11/more-officials-called-to-testify-on-libor-scandal/?partner=rss&emc=rss