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Barclays Hit By £38m Fine Over Client Assets

By Mark Kleinman, City Editor

Barclays will be hit by the latest in a string of financial penalties this week when the City regulator hands out a £38m fine for failing to ensure adequate protection for clients’ funds.

Sky News has learnt that the Financial Conduct Authority (FCA) is to announce as soon as Tuesday that Barclays is to pay the fine – a record for this type of misconduct.

The punishment relates to the bank’s failure to segregate clients’ asset properly and maintain adequate records, the second occasion on which Barclays has been fined for such an offence after a £1.1m penalty three years ago.

The FCA is understood to have concluded that a much more severe penalty is necessary in

order to serve as a deterrent to other firms which continue to demonstrate inadequate controls over clients’ assets.

Insiders said on Monday that the regulator’s announcement would make clear that losses for Barclays’ clients were theoretical rather than actual.

The penalty imposed on Barclays is higher than a £33m fine with which JP Morgan was hit in 2010 for similar misconduct.

Regulators are determined to ensure that major banks separate clients’ funds from their own because of the complexity of unwinding major lenders in the event of insolvency, a problem highlighted with graphic consequences when Lehman Brothers collapsed in 2008.

The latest offences relate to multiple failings in Barclays’ investment banking division over a five-year period between 2007 and 2012, prior to the appointment of Antony Jenkins as the bank’s group chief executive.

Antony Jenkins
CEO Antony Jenkins has reached a number of deals over past misconduct

Mr Jenkins has made cleaning up Barclays and reaching settlements over past misconduct a priority for his leadership.

Since he took over from Bob Diamond in the aftermath of the bank’s £291m fine for rigging the interbank borrowing rate Libor, Mr Jenkins has reached deals for a range of misconduct.

Like other banks, it has set aside billions of pounds to compensate customers who were mis-sold payment protection insurance and interest rate hedging products.

Earlier this year, it agreed to pay nearly £30m for misconduct by one employee who attempted to rig the daily gold price-fix in London.

The process for setting the benchmark price of that commodity and others is now in the process of being overhauled as part of a global clean-up of financial markets.

Mr Jenkins’ strategy to simplify Barclays, which includes shrinking its investment bank by cutting thousands of jobs, is beginning to show signs of paying off.

Earlier this month, it announced the appointment of John McFarlane, a heavyweight City figure who chairs Aviva, the insurance group, as its next chairman, which was welcomed by the City.

It was unclear on Monday whether Barclays would be able to claw back any payments made to former investment bank executives following the FCA’s latest fine.

One source said that the £38m figure included a 30% discount to reflect Barclays’ co-operation with the regulator.

Barclays and the FCA declined to comment.

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