There aren’t too many people who would breathe a sigh of relief at having to shell out £1.1m for a personal mistake – but Jes Staley, the Barclays chief executive, is one of them.
Mr Staley has been fined £642,430 by the Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority (PRA) for his role in attempting to unmask a whistleblower in June 2016 and has also had £500,000 docked from his 2016 bonus by Barclays itself.
Yet it could have been so much worse.
The FCA and the PRA agonised for more than a year over whether to call for Mr Staley’s head but decided, in the event, that a financial penalty was punishment enough.
That was probably a pragmatic decision in view of the turmoil that Barclays has endured in recent years as ousting Mr Staley would probably have destabilised the bank and left it searching for its fourth chief executive in just six years.
However, a lot of people still feel that Mr Staley should have lost his job over the affair, as it was the first big test of the Senior Managers Regime – a new set of rules put in place following the financial crisis to ensure that executives of big financial institutions are made personally accountable for their actions in the job.
Erika Kelton, a lawyer who specialises in whistleblower cases, said the decision contradicted claims from UK regulators that they want to offer better protection to whistleblowers.
She told the Financial Times: “Simply put, it’s a victory for executives who brook no challenges to corporate behaviour and a loss for employees who do nothing more than express concern at company conduct.”
Brad Birkenfeld, a former UBS banker whose whistleblowing led the Swiss bank to be fined $780m for US tax fraud, told Financial News: “It is blatantly clear Jes Staley violated several contractual and legal standards in the UK and in Barclays.
“My initial response when I heard about this transgression was that he should have been fired immediately.
“We now scare off other whistleblowers from coming forward.”
Image: Jes Staley has helped restore the bank’s financial performance
And Nick Leeson, the rogue trader jailed for his part in bringing down Barings in 1994, said: “For whistleblowing to gain momentum, the regulator can’t let this slide.
“It is important to bring people to task. It sends out the right message.”
Moreover, while £1.1m is a huge sum for ordinary mortals, some will question whether it will be that painful for Mr Staley.
He earned £4.2m in total in 2016, the year in which the offence took place, so the amount docked from his bonus that year by Barclays amounts to less than an eighth of that sum.
He earned a further £3.9m last year.
Accordingly, paying these fines is hardly going to leave him going to a food bank for his next meal.
In fact, he could have been fined even more: the final notice from the FCA and PRA makes clear that each of them could have fined Mr Staley 10% of his earnings during the year in question, making a total of £917,800, but the fine was reduced in view of the fact that the Barclays CEO “settled at an early stage”.
Leave aside the fine, though.
What will probably have hurt Mr Staley most is that he has been censured by the two regulators.
Image: Tidjane Thiam was censured in 2013
It is not the first time a major financial services CEO has been punished in this way – Tidjane Thiam, the former CEO of the Prudential, was similarly castigated in 2013 for failing to keep the FCA properly appraised of a potential takeover – but it is the first time that a sitting chief executive of one of the UK’s major banks has been.
The criticism of Mr Staley for breaking rules requiring him to act with “due skill, care and diligence” will also have hurt.
For all of the good work that Mr Staley has done in recent years in restoring the financial performance of Barclays, which will soon be the only major European investment banking player in a field dominated by Wall Street’s big guns, the eventual appraisals of his career will also highlight his role in this affair.
No wonder Barclays was stressing that “there were no findings by the FCA or PRA that Mr Staley had acted with a lack of integrity nor any findings that he lacks fitness and propriety to continue to perform his role as group chief executive officer.”
One other interesting point in the final notice from the regulators is worth dwelling on.
The FCA and PRA will have been stung by accusations that their decision not to demand Mr Staley’s head will have undermined attempts to protect whistleblowers in the financial services sector.
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So it is notable that the regulators have today said Barclays will now be subject to special requirements by which it must report to them annually on how it handles whistleblowing.
They will want to make sure that in Barclays, more than any other institution, there will be no situation any future potential whistleblowers will be afraid to bring to the attention of their bosses.