financial gain

DealBook: Barclays Vows to Fight Energy Trading Fine

July 17, 2013 by NewsMaker Leave a Comment

Chris Helgren/ReutersThe Federal Energy Regulatory Commission contends that Barclays employees made trades that were intended to alter electricity prices to benefit their own positions.

LONDON – Barclays vowed on Wednesday to fight a demand by United States regulators that it pay a record $470 million penalty for suspected manipulation of energy markets in California and other Western states by some of its traders.

The action, announced late on Tuesday by the Federal Energy Regulatory Commission, the government watchdog that oversees the oil, natural gas and electricity industries, comes after months of wrangling with the bank.

The ruling also comes a year after Barclays was required to pay about $450 million for its role in a rate-rigging scandal after some of its traders tried to manipulate the London interbank offered rate, or Libor, for their own financial gain.

In its ruling, the commission said Barclays employees made trades from 2006 to 2008 that were intended to alter electricity prices to benefit their own trading positions.

It included several extracts from internal e-mails that outlined the activities of some of the bank’s traders, who openly discussed how they could lower prices in one electricity market by weighing down another. Barclays employees also discussed how to prop up certain indexes by taking short-term losses in other power markets, according to the ruling.

‘‘F.E.R.C. finds that their actions demonstrate an affirmative, coordinated and intentional effort to carry out a manipulative scheme,’’ the commission said in a statement.

The agency said Barclays must pay a $435 million fine and forfeit $35 million in profit gained from the illegal activity. The combined penalty dwarfs the commission’s previous record fine of $135 million against Constellation Energy last year.

Four former Barclays traders will also have to pay a combined $18 million for their roles in the wrongdoing, according to the statement from the commission.

The commission initially brought the case against Barclays in October. The bank said at the time that it would contest the accusations.

Barclays said it still disagreed with the regulator’s ruling and would continue to fight it. Barclays has 30 days to pay the total penalty or must defend itself against the ruling in Federal District Court.

“We believe that our trading was legitimate and in compliance with applicable law,” the bank said in a statement on Tuesday. “We intend to vigorously defend this matter.”

Barclays is the latest bank to experience the growing assertiveness of the commission, which has the authority to seek a penalty of up to $1 million for each day in which there is a violation of the rules intended to prevent manipulation of the energy market.

In January, Deutsche Bank agreed to pay a $1.5 million fine and surrender about $170,000 in profit related to charges that it manipulated California’s energy markets in 2010. JPMorgan Chase is also under investigation by the regulator for potential wrongdoing in certain U.S. power markets.

The commission has gained increasing power since a law was passed in the aftermath of the Enron scandal that created an enforcement branch at the agency with the authority to impose large fines.

The agency has turned its sights on Wall Street after several large banks created energy trading desks to fill the void left by Enron.

Article source: http://dealbook.nytimes.com/2013/07/17/barclays-vows-to-fight-energy-trading-fine/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: constellation energy, financial gain, wrongdoing

DealBook: British Regulators Slow to Respond to Libor Scandal, Audit Says

March 5, 2013 by NewsMaker Leave a Comment

Andrew Winning/ReutersAdair Turner, the chairman of the Financial Services Authority.

LONDON – British authorities failed to spot interest-rate manipulation by big banks because they were narrowly focused on responding to the financial crisis, according to an internal review by the country’s financial watchdog released on Tuesday.

The audit followed widespread criticism from politicians and some of the banks caught up in the scandal involving benchmark interest rates. Critics said regulators did not respond quickly enough to warnings that employees at certain banks were attempting to alter rates for financial gain.

The review published by the Financial Services Authority, the country’s regulator, said there had not been a major failure of oversight by local authorities, but it added that officials had become too focused on containing the financial crisis to analyze information connected with the potential rate-rigging.

The authority also conceded that it had failed to respond quickly to allegations of so-called lowballing, in which managers altered submissions to the London interbank offered rate, or Libor, to portray their firms in a healthier financial position. The agency added that Libor had been an area of the financial markets that had not received close attention from regulators.

“The F.S.A. did not respond rapidly to clues that lowballing might be occurring,” Adair Turner, chairman of the Financial Services Authority, said in a statement on Tuesday.

Several European banks, including Barclays and UBS, have paid multimillion-dollar fines to American, British and other international regulators related to the continuing investigation into Libor manipulation. Other large firms, including Deutsche Bank and Citigroup, remain under investigation.

The Financial Services Authority’s audit was conducted in response to claims made by politicians and the British bank Barclays that regulators had been informed several times about the potential rate-rigging, but had failed to act.

As part of a major overhaul of the Libor rate, the rate-setting process will come under the oversight of British regulators in April, just as the Financial Services Authority is divided into two separate units as part of a major overhaul of the country’s regulatory regime.

This is not the first time Financial Services Authority has come under fire since the financial crisis began. The agency has also acknowledged partial blame for its role in the bailout of the local lenders Royal Bank of Scotland and Northern Rock.

Article source: http://dealbook.nytimes.com/2013/03/05/audit-faults-british-regulators-response-to-libor-scandal/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: deutsche bank, financial gain, multimillion dollar

DealBook: Barclays Names Former British Regulator as Head of Compliance

December 12, 2012 by NewsMaker Leave a Comment

Stefan Wermuth/ReutersHector Sants, former chief of the Financial Services Authority.

LONDON – Barclays appointed Hector Sants, a former chief of Britain’s Financial Services Authority, as head of compliance on Wednesday, as part of an effort to revamp its image in the wake of a rate-rigging scandal.

In June, Barclays agreed to a $450 million settlement with American and British authorities over charges that some of its traders reported false interest rates for financial gain. The case led to the resignation of several top executives, including Robert E. Diamond Jr, its chief.

The scandal also prompted questions about the role of the Financial Services Authority, the British regulator, in policing big banks. In 2008, a Barclays employee told the authority that the bank was lowering its submissions for the London interbank offered rate, or Libor, although Barclays never specifically said the activities amounted to manipulation.

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Since the summer, Barclays has moved to rethink its compliance and risk-taking activities. It has begun a review of its risky trading operations, and is expected to announce an overhaul of many of its business units in time for its next earnings statement in February.

With the appointment of Mr. Sants, a former UBS investment banker, Barclays is hoping to benefit from his experience working with many of the world’s financial regulators. Mr. Sants left the Financial Services Authority in June.

As head of compliance and government and regulatory relations, Mr. Sants will oversee compliance across all of the bank’s operations, and report directly to the chief executive, Antony P. Jenkins. He will start at the beginning of 2013.

Libor Explained

“Relationships with our regulators and governments around the world are obviously also of critical importance to us,” Mr. Jenkins said in a statement on Wednesday. “We must apply a renewed leadership focus on these to make them as constructive and productive as possible.”

The Financial Services Authority has faced harsh criticism from British politicians, who said it did not do enough to monitor risky trading activity in London’s financial services sector.

In tense testimony before Parliament this year, Adair Turner, the former chairman of the authority, was questioned about the culture at Barclays that led to the rate-rigging scandal.

In April, Mr. Turner had written to Marcus Agius, then the chairman of Barclay, about what the regulator perceived as overly aggressive practices by the bank. The concerns focused on efforts to avoid paying about $770 million in corporate taxes and some of the bank’s accounting methods.

“Barclays often seems to be seeking to gain advantage through the use of complex structures, or through regulatory approaches which are at the aggressive end of interpretation of the relevant rules and regulations,” Mr. Turner wrote, according to documents released by Parliament.

Mr. Sants did raise early concerns about the culture at Barclays. After Mr. Diamond was appointed as the bank’s chief executive, the authority warned the Barclays board that he had “not reached the level of openness, transparency and willingness to air issues” with regulators,” according to an e-mail. “I’d like to record that in that conversation, I made clear that our concerns about Barclays’s culture were not some generic observation but specific to Barclays,” Mr. Sants wrote in a 2012 letter to Parliament.

After the Barclays case, the Financial Services Authority conducted a three-month review of the Libor setting process, which has led to a major overhaul of the rate. It acknowledged that the authorities should have stepped in sooner to fix problems with Libor. It also laid out plans to make attempts to alter the rate a criminal offense, and to implement a new auditing system to ensure traders could not unfairly profit from small changes in the rate.

The Financial Services Authority will soon be disbanded, and many of its regulatory powers are to be returned to the Bank of England, the country’s central bank.

This post has been revised to reflect the following correction:

Correction: December 12, 2012

An earlier version of this post misstated Hector Sants’s new job title. He will be head of compliance and government and regulatory relations, not regulatory regulations.

Article source: http://dealbook.nytimes.com/2012/12/12/barclays-appoints-former-british-regulator-as-head-of-compliance/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: financial gain, investment banker, top executives