The provision is larger than the £290m the bank was fined for manipulating Libor in 2012 and has been revealed as the Financial Conduct Authority (FCA) attempts to agree a settlement with six major banks over their activities in the £3.5tn-a-day foreign exchange markets.
The regulator hopes to reveal the outcome of its investigation and the scale of penalties next month. Royal Bank of Scotland, which reports financial results on Friday, is also part of the investigation and thought likely to have to set money aside to cover potential future penalties.
The expected publication of the regulatory action next month is likely to bring with it the release of transcripts of emails and electronic chats as with the Libor scandal. Those messages included traders promising each other champagne, their names in gold letters and making quips such as “always happy to help,” or “done … for you big boy,” after manipulating the interest rates.
Tushar Morzaria, Barclays finance director, did not disclose on Thursday when any regulatory announcement might be made but said the £500m being set aside was “the best estimate [based] on the dialogue we are having with certain regulatory agencies”.
Barclays also reported its figures for the third quarter, in which it also took an extra £170m hit to cover the cost of payment protection insurance (PPI) mis-selling.
The currency rigging fine will be the latest in a string of penalties to be imposed on Barclays – which admitted that fraud allegations made by the New York attorney general Eric Schneiderman were hurting the performance of its investment bank, where profits plunged by a third.
Antony Jenkins, promoted to become boss of the bank in the wake of the Libor scandal, said the profits fall in the once dominant investment banking arm was disappointing.
Some of the fall in the investment bank came in its equities operation where Schneiderman claimed in June that the bank was misleading customers about the way it had operated its “dark pool system” to allow specialist traders to benefit at the expense of customers. Barclays is fighting the allegations about the dark pool, a private trading system of the kind highlighted by best-selling author Michael Lewis in Flash Boys: a Wall Street Revolt.
Morzaria said Barclays’ market share had fallen since the allegations were made.
Profits in the investment banking arm – which had grown rapidly under Jenkins’s predecessor, Bob Diamond – were down 38% in the nine months to the end of September to £1.3bn, although profits at the high street banking operations rose 18% to £2.2bn.
In the third quarter, the investment bank’s profits fell more steeply, to £284m from £465m a year ago.
Jenkins has set out a plan to cut 19,000 jobs as he tries to scale back the investment banking arm, which has repeatedly caused conflict with investors over the size of bonuses given to top staff. The bank has stopped publishing quarterly information about the amount of revenue being set aside to pay bonuses because it says the figures are distorted by payouts stemming from past years.
About 7,000 of the job cuts were for the investment bank’s 24,000-strong workforce when the overhaul was announced in May. Some 7,800 jobs have gone in the last 12 months.
Profits for the entire bank for the nine months rose 5% to £4.9bn when items such as a £364m loss on the sale of its troubled Spanish business are stripped out and a gain of £461m on assets relating to the Wall Street operations of Lehman Brothers – which Barclays bought in 2008 – are taken into account. On a statutory basis, the profits rose 31% to £3.7bn.
Barclays was able to release £160m of the £1.5bn provision it has already made to cover compensation claims for small businesses mis-sold interest rate hedging products. The additional £170m provision for PPI claims takes the bank’s total provision to £5bn and comes after Lloyds Banking Group made a further £900m provision, taking its total bill to above £11bn. The PPI scandal is the costliest ever incurred by banking industry.
Barclays will pay its usual 1p quarterly dividend.
Original Article
Source: theguardian.com/
Author: Jill Treanor
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