Barclays Trims Job, Scales Back Ambitions

Barclays bank financial scandalsBarclays has announced that it will downsize its workforce significantly over the next two years. The scandal-ridden bank plans to axe more than 7,000 jobs in its investment division after a series of public scandals and risky investments hit the bank’s reputation and bottom line.

In addition to the 7,000 jobs forecast to be lost in Barclays’ investment division, an additional 12,000 staff will lose their jobs with the bank by 2016. About 10,000 of the jobs Barclays plans to axe are based in the UK. The downsizing is part of a plan from new chief executive Antony Jenkins to “clean up” Barclays’ image.

Former chief executive Bob Diamond left the bank after the Libor scandal – a serious public relations disaster for the bank that was one of several scandals to damage its reputation with investors and retail customers. Critics of Barclays called the growth of its investment units under Diamond a “casino” strategy built on deception.

Jenkins has already encountered obstacles in his effort to bring Barclays back into a position of trust with the public. The bank suffered a PR setback earlier this year as it was revealed that high-level staff were paid over £1.5 billion in bonuses last year while profits at the bank declined rapidly.

In addition to the large-scale job cuts, Barclays is expected to significantly scale back its bonuses this year. In a statement, Antony Jenkins said: “With a smaller investment bank, our expectation is that the number of highly paid people, defined as over £1 million, will come down over time.”

The job cuts will affect an estimated 19,000 people worldwide – a significant size of Barclays’ 140,000-strong workforce. Although the bank hasn’t announced any news about branch closures, Antony Jenkins claimed that it was likely the number of bank staff working at retail branches would fall slightly as a result of the cuts.

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Banks ‘Most Complained About’ UK Businesses

10-AprilMore than 2.5 million complaints were made against Britain’s financial companies in the last six months of 2013 alone. Many of the country’s largest banks were required to deal with thousands of phone calls and online complaints from customers on a daily basis.

The country’s most complained about bank was Barclays, which managed to rack up over 309,000 complaints during the second half of 2013. Lloyds Bank ranked second in total complaints, fielding over 256,000 disgruntled customers over the six months to the end of the year. Bank of Scotland and National Westminster closely followed.

While banks remain the most complained about companies in the UK, total financial industry complaints have fallen over the past year. According to new data from the Financial Conduct Authority, complaints related to financial firms fell 15 per cent in the second half of 2013, compared to the first half of 2012.

Despite remaining the country’s most complained about bank, Barclays managed to reduce the number of complaints filed by its customers by 17 per cent. NatWest and Bank of Scotland also reduced complaints, by 5pc and 18 per cent respectively. Only Lloyds Bank saw an increase in complaints – a modest one per cent uptick.

Experts believe that the total number of complaints filed against banks declined due to the reduced scale of the PPI scandal. Although PPI complaints continue to account for more than half of all complaints filed against banks, the number of complaints of direct relation to PPI declined by 22 per cent over the course of the year.

Outside the retail banking industry, financial services companies continued to rack up complaints. Hargreaves Lansdown, the company which experienced a technical failure during the Royal Mail flotation, was the most complained about investment firm in the UK. Barclays Stockbrokers too second place in the investment category.

FCA regulations require companies that receive more than 500 complaints in a six month period to publicly publish the information. Although banks remain the most complained about businesses in the country, the declining volume of complaints is evidence that customers are growing less frustrated with the financial sector.

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City of London ‘In Danger’ as Investment Banks Hounded

March-23According to leading fund managers, the City of London could lose its position as Europe’s most important financial centre if it continues to ‘hound’ top investment banks over staff bonuses.

Public anger of the scale of bank bonuses has resulted in rhetoric from politicians and shareholders painting leading banks as thoughtless and unconcerned with the needs of the public.

Recent targets have included Barclays, which has the largest domestic investment banking operation in Britain. The bank was criticised by shareholders for its large bonus payouts to executives after its recent profits fell below expectations.

Industry leaders believe that the negative approach to banking could make it tough for London to maintain its position as the leader of European finance. The City UK chairman Gerry Grimstone noted the importance of London staying on top of the European investment banking industry.

Speaking to The Sunday Telegraph, Grimstone, who is also the chairman of Standard Life, said: “If Britain wants to be part of the global financial services sector it has to have the people within it that can run these businesses.”

“It is very, very important that London is one of the investment banking centres of the world.”

Barclays’ response to the recent criticism included an announcement that, should it want to, the company could relocate its British investment banking division to New York City in order to avoid criticism in London.

Director of investment at Royal London Asset Management, Robert Talbut, also has fears that anti-banking attitudes could make London a difficult place for investment banks to do business.

“If ultimately Barclays take the view that the regulatory and political pressure is going to continue unremittingly that [relocating to New York] could be the right thing to do.”

He continued: “We need to be very careful we don’t accidentally drive the business out of London.”

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Barclays Bonuses Needed to Prevent ‘Death Spiral’

March-05Barclays has defended its lucrative executive bonuses as a necessary part of running a global investment bank. The bank’s chief executive, Antony Jenkins, is preparing to explain to critics the importance of large bonus payments to the company’s rising number of executives paid in excess of £1 million a year.

The institution’s latest annual report will soon be released, revealing that the total number of executives paid in excess of £1 million has substantially increased from the 428 on staff in 2013. The report will also reveal an increase in the number of bank executives paid at least £5 million per year – admittedly, a small number.

Jenkins’ defence of Barclays’ lucrative payouts may seem odd for those familiar with his history at the bank. In 2012, he stated that it was essential that the bank lowered its cost-to-income ratio in order to remain competitive. In the last two years, profits have not increased while bonuses have continued to rise.

Despite admitting that the decision to increase compensation to executives this year was the “toughest” he has made during his Barclays career, Jenkins defended raising bonuses as necessary for running a competitive bank. In The Telegraph, the decision was defended as important for Britain’s future as a global banking sector.

With Royal Bank of Scotland scaling down its international activities and focusing on business within the UK, Barclays’ role has increased. Without a leading position in the United States – and all the pay packages that this role entails – the UK could be left without a significant international bank headquartered within its borders.

In an interview with The Telegraph, Jenkins made his thoughts clear: “I don’t think the anger around investment banking in the UK should guide our strategic decision making.”

Analysts believe that Barclays aims at becoming Britain’s global investment bank, competing with US-based firms such as Citigroup and JP Morgan.

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European Commission Fines Eight EU Banks for Rate Rigging

december-06Eight banks, including UK-based RBS, have been fined for taking part in illegal cartel action to fix interest rates. The banks fixed rates for financial derivatives, causing an increase in pricing for trillions of dollars worth of financial products such as credit cards, personal loans, and mortgages.

Of the eight banks involved in the scandal, two managed to avoid financial penalties by exposing the existence of the rate-rigging cartel: Barclays and UBS. The total fines add up to an astounding 1.7 billion euros (£1.4 billion) and are intended to prevent a similar rate-rigging scandal from reoccurring.

Other banks to be involved in the scandal include Deutsche Bank, which was fined a total of 725.36 million euros – the largest fine levied against all of the banks. Fines were also dished out to JPMorgan, Credit Agricole, HSBC, and others for their own involvement in the rate-rigging conspiracy.

Finance industry experts have voiced their frustration that the government-owned Royal Bank of Scotland was involved in the scandal. The bank paid £391 million for its involvement in a previous rate-rigging scandal involving the Libor interest rate, with UK financial services company Barclays also a subject of the fines, paying a total of £290 million.

After Barclays was fined, chairman Marcus Agius and chief executive Bob Diamond promptly left the company. The bank claims that it volunteered information about the rate-rigging scandal to the European Commission and “co-operated fully” with investigators involved in the case.

Investigators claim that they were shocked not just by the scale of the scandal, but by the way banks brazenly co-operated with each other in order to fix rates across the industry. European Commission vice-president of competition policy Joaquin Almunia noted that the banks are “supposed to be competing with each other” for business, and not manipulating benchmarks together.

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PPI Claims Compensation Exceeds £18 Billion

august-02-03Lloyds has reported that it may need to spend hundreds of millions of pounds over its £7.3 billion budget in order to settle PPI claims. The government-backed lender has compensated customers for PPI programs that were misleading sold through a customer mailing programme.

The bank has budgeted over £7.3 billion to manage the claims, but is concerned that an increase in the average claim value could require additional capital. The lender, which is partially owned by taxpayers, claims that adding £100 to the average claim size would cost the bank upwards of £70 million in total customer compensation.

Other issues for the bank include the possibility of more claims being filed. Lloyds has estimated that an additional 100,000 complaints made using its programme is likely to cost the bank upwards of £170 million. The bank is currently paying out an average of £1,700 per customer that makes a PPI claim using its programme.

Despite this, Lloyds has forecasted that the average future payout is likely to be just £1,440 as fewer high-value claims are made. It has noted that every additional £100 would increase its total costs by £70 million. The response rate to its mailing efforts is currently 27 percent, although this could increase in the future.

Other banks have also paid out large amounts in PPI claims to customers that were mislead into purchasing PPI policies. Barclays has set aside approximately £4 billion to compensate customers that purchased PPI policies through the bank, alongside a wide range of other British lenders that have spent a total of £18 billion.

The total compensation is almost double the amount of money spend on the London Olympics, making it one of the most expensive banking scandals in recent history for the UK. The scandal has not only cost banks financially – many banks have been hit with a serious reputation downgrade amongst retail investors and families.

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july-17-03Barclays has been sanctioned a record $453 million after manipulating the price of energy in key markets such as California and several other Western states. Energy regulators claim that the bank deliberately manipulated the prices of energy in the United States using a network of power traders to enhance its own position.

The bank’s activities echo that of infamous energy firm Enron, which manipulated the price of energy in California over a decade ago during a summer known for its numerous blackouts and power shortages. The $453 million fine is ambitious for regulators in the United States due to its sheer size and potential ramifications.

The fines were upheld by the Federal Energy Regulatory Commission – the United States’ most powerful energy regulator. FERC proposed the financial penalties just under one year ago after manipulation of energy prices by the bank’s traders grew from an insider conspiracy into a major regulatory issue.

Barclays manipulated the energy prices between 2006 and 2008 by deliberately losing money on trades related to physical power. The bank’s actions violated the Federal Power Act, which forbids market manipulation. The fine is one of several that affect Barclays in recent years, including the $450 million Libor rigging fine.

The bank plans to aggressively fight US legal efforts to fine it for its power trading behaviour, insiders claim. Spokesman Marc Hazelton weighed in on the issue with a statement claiming that Barclays had ‘cooperated fully with the FERC investigation’ and announcing that the company would ‘vigorously defend this matter.’

As the case moves into federal court, legal analysts expect it to become a benchmark for further US regulatory activity. The powers of FERC were increased by Congress in 2005 as concerns over energy manipulation by Enron and other firms increased the need for intensive regulatory investigations.

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Barclays to Sell Data on Account Holder Spending Habits

june-25-03Barclays recently announced that it would begin selling data about its 13 million clients to businesses. The bank recently issued a letter to its customers outlining who will have access to their data in the future, as well as the type of information that will be shared with other companies and government departments.

The letter details that voice and visual data – for example, user images and voice recordings – are held by the bank. Barclays also reportedly records interactions from its users on Facebook and Twitter, noting that it only records information that’s directly related to conversations with the bank’s profiles and its staff.

While privacy advocates have voiced their concern about the bank’s sale of user data, Barclays claims that its policy is not overly intrusive. The bank will only use the data to indicate trends and aggregate consumer behaviour, and will not keep any information about specific users or accounts.

A spokesperson from the bank added that the policy was ‘nothing sinister’ and that the new policy was designed to improve the bank’s services rather than profiteering from client data. The data will reportedly be shared with specific third parties in the form of reports and studies, rather than released for purely commercial use.

Commenting on the possibility of data being shared with government departments, the bank noted that user data would only be released to indicate trends that would be of use to political leaders. The bank gave the example of user data being used to give politicians a greater idea of habits and bank activity within their constituency.

Barclays noted that the system would allow it to crack down on fraudulent account behaviour using user data and records. The bank noted that user data would not be used to deliver targeted advertisements or other marketing messages – a policy that recently affected Tesco Clubcard users.

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Just one day before their annual meeting with shareholders, it has been projected that one-fourth of the Barclay’s shareholders will protest current pay policies. As well, the bank will need an estimated £300 million to cover mis sold PPI (payment protection insurance) which will only add insult to injury.

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In recent weeks The Telegraph has been investigating allegations that UK banks have been misselling financial products to SMEs in the UK and there are growing concerns that the amount of reparation will at least equal that of mis sold PPI of recent years. Within the past three weeks evidence has been mounting these banks are selling derivatives under the premise that they are interest rate swaps. Literally thousands of customers have been mis-sold these products without having been given the benefit of relevant details.

Two banks in particular have been mentioned by this newspaper, which include the Royal Bank of Scotland and Barclays. According to Damien Reece writing for The Telegraph the Royal Bank of Scotland has reportedly admitted to selling interest-rate swaps as derivatives and that Barclays did settle out of court in order for details from reaching the public. According to Reese, Barclays had also previously been forced into an apology to the FSA because it had come to light that they had asked their customers to withhold important information from the UK regulator.

According to the investigation conducted by The Telegraph, Professor Emeritus Michael Dempster of the Centre for Financial Research, University of Cambridge, believes that this could be easily as huge as the £5 billion scandal in the misselling of payment protection insurance. The Telegraph reports that the FSA has given them a promise to review the evidence it has been handed but Mr. Reece believes they are not moving quickly enough. During this time the problem is compounding itself which will mean that businesses are incurring even greater losses. He further states that the paper has done more than its fair share of doing the FSA’s job for them.

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