THE financial services watchdog dealt another blow to the industry yesterday, saying it had been “sullied” by the latest scandal at Barclays.
The bank was hit with a £26 million fine from the Financial Conduct Authority (FCA) for cheating a customer by fixing the price of gold.
It was accused of failing to adequately manage conflicts of interest between itself and its customers from 2004 to 2013, and the FCA issued a warning to the entire financial sector to keep its house in order.
The FCA said Barclays’ lack of internal controls allowed a trader to manipulate the setting of gold prices just a day after it was fined for rigging Libor interest rates in 2012.
Daniel James Plunkett, who was a director on the bank’s precious metals desk, fixed the price in order to avoid the payment of $3.9 million to a customer under an option, which boosted his own trading book by $1.75 million, the FCA said.
The bank later compensated the client in full. Plunkett, who no longer works at Barclays, was banned from the industry and fined £95,600.
Tracey McDermott, the FCA’s director of enforcement and financial crime, said: “A firm’s lack of controls and a trader’s disregard for a customer’s interests have allowed the financial services industry’s reputation to be sullied again.
“Traders who might be tempted to exploit their clients should be in no doubt – such behaviour will cost you your reputation and your livelihood.
“Barclays’ failure to identify and manage the risks in its business was extremely disappointing.”
She said that, with Plunkett’s actions coming the day after the publication of the FCA’s Libor and Euribor action against Barclays, the bank was “clearly on notice of the potential for conflicts of interests around benchmarks”.
Barclays is the first bank fined over attempted manipulation of the 95-year-old London gold market daily “fix”.
Although the fine is understood to be a one-off and not part of a wider investigation into gold price rigging, McDermott said the FCA was keeping a close eye on similar operations across the financial sector. “We expect all firms to look hard at their reference rate and benchmark operations to ensure this type of behaviour isn’t being replicated,” she said.
“Firms should be in no doubt that the spotlight will remain on wholesale conduct and we will hold them to account if they fail to meet our standards.”
The fine marks another blow to Barclays’ attempts to put past problems behind it. Chief executive Antony Jenkins is attempting to restore the bank’s reputation after a series of scandals, but the emergence of past sins are hampering his efforts.
He has said the bank’s culture had to change and that systems and controls were improving. “We very much regret the situation that led to this settlement,” Jenkins said. “These situations strengthen our resolve to improve.”
But David Hillman, spokesman for the Robin Hood Tax campaign, said the ruling showed that the City needed “bringing to heel”.
He said: “Unfortunately this is just the latest in a seemingly endless line of scams and subterfuge from Britain’s supposedly reformed financial sector.
“The government has given the City far too long a leash – it’s time to bring the banks to heel and ensure that instead of ripping us off they make a positive contribution to society.”