By Lawrence White
LONDON Criminal charges over Barclays' fundraising in the 2008 financial crisis add to the bank's legal battles in key markets just as rivals are leaving their troubles from that period behind. Britain's Serious Fraud Office charged Barclays Plc and four former executives on Tuesday over undisclosed payments to Qatari investors during a 12 billion pound ($15 billion) emergency fundraising in 2008.The bank, whose top management has changed since then, said it is considering its position over the charges which add to pressure on Chief Executive Jes Staley less than three months after regulators put him under investigation.He has repeatedly described its legal cases as being 'legacy issues' that the bank is seeking to put behind it. While it is not unusual for global banks to have an array of regulatory battles even as business shrinks, competitors, including Deutsche Bank, have been working their way through major cases, especially those from the crisis. Barclays is facing 21 regulatory investigations and civil actions mainly in the United States and Britain, its 2016 annual report showed. These include major probes by the U.S. Department of Justice (DoJ) and the Securities and Exchange Commission (SEC). "It now appears that Barclays are fighting just about all the major regulators of the world," said Edward Firth, analyst at KBW in a research note on Tuesday."At some stage this must be a serious distraction to the management of the core business."Barclays declined to comment on the business impact of the charges.Since Barclays' holding company has been charged rather than any of its subsidiaries its business operations should be shielded from any negative fallout if the holding company is convicted on any of the charges, lawyers said.
But the criminal charges, the first to be levied on a bank anywhere in the world for its conduct during the crisis, could lead to fines. It could also mean lost business from governments that put a high premium on banks' behaviour and which could temporarily halt or reduce business with a lender accused of fraud. "The accusation of fraud could impact Barclays' banking relationships with government and United Nations departments as well as the bank's ability to bid for business from those entities," said a senior lawyer with expertise in white collar crime who did not wished to be named as his firm works with Barclays.RIVALS COULD BENEFIT
Probes by the DoJ and SEC over the Qatar payments are still pending, and centre on whether the bank breached U.S. anti-bribery rules.Other major cases include an investigation by the SEC and DoJ into hiring practises in Asia; global probes over alleged manipulation of interest rates and foreign exchange markets; and the DoJ lawsuit alleging fraud over mis-selling of mortgage backed securities.
Barclays also faces a civil action by the U.S. Federal Energy Regulatory Commission over alleged manipulation of energy markets in California, and is providing information to the DOJ and Commodity Futures Trading Commission about allegations of precious metals price manipulation."Barclays now finds itself facing yet another regulatory battle...Skeletons seem to be jumping out of lots of closets at once for Barclays," said Laith Khalaf, senior analyst at online investment platform Hargreaves Lansdown. Rivals have also faced legal battles.Royal Bank of Scotland (RBS.L) , for example, is fighting cases with the U.S. DoJ, FHFA and New York State attorney as well as the Swiss Financial Market Authority, UK Financial Conduct Authority (FCA) and an investigation by the Central Bank of Ireland.But others have started to move on.
Deutsche Bank, waylaid for years by mounting litigation costs, has cleared several major legal cases in the past year, including settling charges with the DoJ for mis-selling mortgage securities.Swiss bank Credit Suisse(CSGN.S) in December cleared its biggest legal cloud by agreeing a $5.3 billion settlement over its own mortgage-backed securities mis-selling case. Barclays by contrast is seeing its major legal cases mount.It adopted a more combative stance than its peers over the charges of mis-selling mortgage securities, with the bank contesting the DOJ's claims where rivals have settled.The UK fraud charges also come after the FCA and Prudential Regulation Authority opened an investigation into Staley over his attempts to unmask a whistleblower.The former JPMorgan banker took over the reins at Barclays in December 2015 and impressed investors by restructuring the bank to remove bad assets and reinvigorate investment banking. But the investigation raised questions about the American, who put a premium on improving bankers' conduct with a stream of internal messages and training sessions about good behaviour.Investors largely shrugged off the news of Tuesday's charges, with the bank's shares falling 2 percent by the end of trading against a 1 percent drop in the STOXX European banks index .SX7P."Whilst broadly expected, we see this as negative for Barclays as it clearly implies that Barclays failed to reach a settlement (speculated at £100-£200m last week) and that the SFO are looking for a higher fine," said Firth. (Additional reporting by Andrew MacAskill, and John O'Donnell in Frankfurt; editing by Anna Willard)
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Updated Date: Jun 21, 2017 00:15:04 IST