Barclays chairman complains about ‘disproportionate’ fines


John McFarlane criticises £20bn in penalties, while new chief Jes Staley says bankers lost moral compass in 1990s as reports from The Guardian state.

The chairman of Barclays has hit out against the £20bn in fines and taxes imposed on the bank in recent years as it chopped its dividend and announced it was scaling back in Africa to focus on the UK and US.

As Barclays reported an 8 per cent fall in profits to £2.1bn in 2015, John McFarlane warned about the “societal costs” of multibilllion pound taxes and finesand complained that last year’s £1.5bn fine for foreign exchange rigging was one of the highest imposed, even though Barclays’ offences were the same as rivals.

“A £50m fine or penalty is the equivalent of employing 1,000 fewer employees, closing 100 small regional branches, or forgoing the capacity to lend over £500m to small businesses or consumers,” McFarlane wrote in the bank’s annual report. “The charges are not proportionate to our smaller size and ability to pay relative to many of our peers.”

The bank is to cut its dividend payout to shareholders by more than 50 per cent for the coming two years. However it has cut its bonus pool by only 10 per cent to £1.6bn and paid 323 staff more than £1m. The highest paid director, whose identity is not revealed, received £9.5m.

Its shares ended 8 per cent lower at 158p on Tuesday – and at one point were suspended because of the volatility in trading – after the bank reneged on a promise made by McFarlane only in June to pay a higher dividend every year.

The bank’s new chief executive, Jes Staley – who only took the helm in December– instead stunned the City by announcing the full-year dividend for 2015 of 6.5p would be cut to 3p in each of 2016 and 2017.

“Note to the board: don’t cut the dividend (again) without ample signalling beforehand,” said Sandy Chen, analyst at brokers Cenkos.

Since July, when McFarlane promised he would double the share price in three years, the shares have fallen from 260p and Staley, who bought shares at 233p, said there would be “tremendous upside” in the shares once all the conduct issues were dealt with.

Making his first presentation since being hired to replace Antony Jenkins, who was ousted in July, Staley said addressing these conduct issues were his priority as he ended Barclays global ambitions to become instead a “transatlantic” bank.

The bank published a list of of regulatory and legal matters it faced after taking more than £4bn of provisions for 2015, including a £1.5bn increase to cover the cost of more payment protection insurance mis-selling claims. New issues which could result in substantial charges include:

  • Enforcement action from the Financial Conduct Authority over the way it sold structured deposit products to UK customers from June 2008 to now.
  • An investigation by the US authorities into hiring practices in Asia, similar to the one disclosed by HSBC over the hiring of individuals with links to government officials, known as “princelings”.
  • Legal action relating to its fundraising in 2008, being brought by dealmaker Amanda Staveley. She is claiming £721.4m plus costs.
  • An investigation into the bank’s US wealth management business.
  • A review in its South African business into “potentially fraudulent activity by certain of its customers using import advance payments”.
  • A court case involving “spoofing” in trading in US government bonds.An American who spent much of his career at US bank JP Morgan, Staley quashed concerns Barclays would need to bolster its financial strength through a cash call, saying there was “no need for a rights issue”.

Attacking pay practices in the industry in the past, Staley, who was paid more than £250,000 for one month’s work, said: “It is fair to question whether bankers lost their moral compass during the 90s and first decade of this century, because of the single minded pursuit of personal wealth.

“A company that retains the loyalty of its employees solely based on compensation is a company that gambles with its institutional culture.

“I want Barclays to be a bank where our employees choose to work here because they believe in the institution, and its intrinsically valuable role in society.”

Jenkins received £3.4m for his six months at the helm but will continue to be paid until July this year. He also received £106,000 in legal costs and could receive up to 1.9m shares – worth £3m at current share prices – in the coming years.

Staley expects the number of jobs at Barclays – which stands at 130,000 – to fall by at least 44,000 as he pulls back from Africa. Barclays expanded into South Africa in 2005 when it bought a 60 per cent stake in local bank Absa. He said the headcount had fallen by 5,700 as a result of a hiring freeze he put in place in December.

Staley is preparing for the UK ringfencing rules being introduced in 2019 which require banks to separate their high street and investment banking businesses by creating two divisions.

Barclays UK will be the ringfenced high street operation, while Barclays Corporate and International will house the once powerful investment banking division.

He defended the model of having both investment banking and high street banking and quashed speculation that the investment bank, once of the powerhouse of the business, might be spun off.

“There is no doubt that having a balance between a consumer bank and wholesale bank and has been the safest place to be through virtually any financial crisis. We will have another financial shock – it’s inevitable.”

Gary Greenwood, analyst at Shore Capital, described the results as “dismal” and noted the bank was ditching targets previously set to measure returns to shareholders.