LONDON (AP) — Barclays revealed Wednesday that it is the subject of an international investigation over possible manipulation of currency trading — another hit on the reputation of Britain's second-biggest bank.
Though Switzerland's UBS and other major banks also have revealed they are cooperating in the investigation, the bank's disclosure that authorities are looking into currency trading in multiple markets will be seen as a setback for Chief Executive Antony Jenkins' efforts to change the culture of the scandal-plagued company.
Jenkins took over this year pledging to lead a bank devoted to ethical behavior after Barclays was rocked by a $453 million fine for manipulating a key global interest rate and other scandals. But the past keeps coming back to haunt the bottom line. The bank also said that the Financial Conduct Authority warned Barclays it faces a 50 million pound fine ($80 million) for failing to disclose it had entered into advisory agreements with Qatar Holdings LLC before it raised money from Qatari investors in 2008.
The bank is contesting the authority's finding that the primary purpose of the agreements, which totaled 332 million pounds over five years, was to make additional payments for the Qatari investment. Barclays turned to Qatari investors to bolster its capital at the height of the financial crisis. That gave it an advantage over British rivals Lloyds Banking Group and Royal Bank of Scotland, which were bailed out by the government.
The U.S. Department of Justice and the Securities and Exchange Commission are investigating whether the group's relationships with third parties, including the Qatari investors, violated the U.S. Foreign Corrupt Practices act. The Federal Reserve has asked to be kept informed.
"It is not possible to estimate the full impact on the Group if the final conclusion of these matters is adverse," Barclays said in its third-quarter earnings statement. Barclays reported that net income fell 26 percent to 2.8 billion pounds for the 9-month period ending in September. The bank attributed the decline to its "Transform," program, which aims to reduce risk after the financial crisis and change the culture of the bank.
"The FX review is something of a concern and adds to the ongoing investigations," said Richard Hunter of Hargreaves Lansdown, a London-based stockbroker and asset manager. "In addition, the costs of transforming the bank have impacted negatively on both operating expenses and therefore the cost income ratio."
Barclays has been troubled by scandal in recent years, having been fined by regulators in the U.S. and Britain for manipulating the London interbank offered rate, or LIBOR, the benchmark for trillions of dollars in loans — including some home mortgages
The brash American CEO, Bob Diamond, was forced to resign in the scandal. Other troubles included the mis-selling of insurance and interest rate products to consumers and small businesses.