Barclays CEO Staley under investigation for whistleblower breach
By Oliver Haill
Date: Monday 10 Apr 2017
(ShareCast News) - City watchdogs have launched an investigation into Barclays chief executive Jes Staley's attempts to uncover the identity of a secret whistleblower at the bank, which went so far as to request assistance from a US law enforcement agency.
After conducting its own investigation, the FTSE 100 bank has issued a formal written reprimand to Staley and will dock his pay by as much as £1.3m, as well as passing the details onto the Financial Conduct Authority and the Prudential Regulation Authority.
Last year, Staley sought to identify the author of an anonymous letter sent to several members of the board letter raising concerns about a senior employee who had been recruited by Barclays, including raising concerns of a personal nature, which Staley felt were an unfair personal attack on the new hire.
Despite being told his first inquiry to the group information security team was inappropriate, Staley later made a further request that the team attempt to identify the author of the first letter, leading to them contacting and receiving assistance from a US law enforcement agency to identify the letter's author.
After another employee blew the whistle on Staley, raising concerns over Barclays' whistleblowing procedures, the board instructed an external law firm to investigate and to notify the FCA and PRA and other relevant authorities.
Chairman John Macfarlane said Barclays would commission an independent review of the bank's processes and controls to determine what improvements may be required, having concluded that Staley "honestly, but mistakenly, believed that it was permissible to identify the author of the letter and has accepted his explanation that he was trying to protect a colleague who had experienced personal difficulties in the past from what he believed to be an unfair attack, and has accepted his apology".
Although identifying a whistleblower is not permissible under current legislation, Staley retains the full support of the board, which will recommend his re-appointment at the annual shareholder meeting on 10 May.
Shares in Barclays fell more than 1% below 213p in early trade, their lowest point since December, before quickly getting back into positive territory.
Given Barclays' history of regulatory misdemeanours, most notably the high profile investigation into Libor rigging which led to former CEO Bob Diamond's departure from the group, broker Shore Capital said the revelation represents a major embarrassment for the board as it tries to rebuild the group's reputation.
"As for Mr Staley, it remains to be seen whether the PRA and FCA come to the same conclusion as the Board in allowing him to remain in his post, although we would assume that the sanctions proposed will have already been discussed with the regulators and should therefore help to mitigate this risk. It is possible the group may also be fined," analyst Gary Greenwood said, while the potential removal of Staley from his role would be greatly damaging.
He added: "While Mr Staley's reputation has undoubtedly taken a serious knock, we believe that it remains in the best interests of shareholders to keep him in the post of CEO and hence we recommend that they follow the board's direction and vote in favour of his reappointment at the AGM in May."
Laith Khalaf at Hargreaves Lansdown said the lack of much share price reaction was probably a sad reflection that the market thinks the potential costs of this infringement are small beer in the context of the litigation and conduct costs racked up by the bank in recent years.
"Incidents like this do nothing to convince the public that banking misdemeanours are in the rear-view mirror, and this is undoubtedly an embarrassment, not to mention a distraction, for Barclays and its CEO," he said.
"Barclays has actually been doing quite well under Jes Staley's leadership, so this error is a blemish in what was starting to look like a promising tenure. Shareholders will be doubly disappointed that the bank is once again in trouble with regulators, and that the man at the top of the organisation is responsible for it."
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