COMMENT: Barclays fined | Time to Speak Up

Martin Flanagan
Martin Flanagan
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JUST when we thought it might possibly be safe to dip our consumer toes back in the banking waters, a fin cleaves the surface. 
 Cue banking sector equivalent of the soundtrack from Stephen Spielberg’s Jaws…

Barclays has been fined almost £38 million by the Financial Conduct Authority (FCA) for ropey “systems and controls” which failed to properly safeguard £16.5 billion of client assets.

The failings occurred between November 2007 and January 2012 – that’s from two months after customers were queuing round the block to withdraw their money at Northern Rock to a full year after then-Barclays boss Bob Diamond told MPs that “the time for remorse is over”. Well, the time for banks cocking it up certainly isn’t.

Only last month the City regulator fined Royal Bank of Scotland nearly £15m for selling mortgages metaphorically on the back of a fag packet between 2011 and 2013. The banking sector seems hellbent on not letting the FCA have time on its hands.

The regulator said the slack practices at Barclays meant that customers risked incurring extra costs and delays in getting their money back – or even losing their assets – if the bank ever went insolvent. It is par for the course after each banking black eye for banks to say lessons have been learnt. Time to move on (Diamond-like) hangs in the air unsaid.

The FCA said: “Barclays failed to apply the lessons from our previous enforcement actions…”

There’s not a meeting of minds between the regulator and the industry, it appears, on its judgments being taken on board and acted upon. Heigh-ho.

When speaking up trumps whistle-blowing

THE more hard-nosed, if morally dubious, American regulatory practice of sometimes paying whistle-blowers exposing financial services wrongdoing and failures has not seemed to find favour with UK policymakers. Not very British.

But a new initiative from the Chartered Institute for Securities & Investment, the City’s leading ethics body, dubbed “Speak Up”, might be a useful halfway house to root out malpractice.

Essentially, CISI says it is preferable that people of integrity at all levels of banks and insurers convey any concerns they have to senior management, either directly or through internal helplines, at an earlier and therefore less incendiary stage.

This addresses directly the fact that the weakness of whistle-blowing is it tends to be heavily reactive, clamping down when the horse has bolted pretty much down the track. CISI’s approach, by contrast, suggests employees raise a metaphorical eyebrow and hand well ahead of there being any need to blow a belated whistle. The campaign had a financial heavy-hitter voicing support for it yesterday in Douglas Flint, the Scot who chairs the HSBC banking giant.

Flint suggests you would know you had a good culture in a financial organisation when it was not thought an unusual event when staff raised their ethical concerns.

It still has to ensure, however, that it does not lead to the messenger getting shot. CISI quotes research showing that an astonishing one in four whistle-blowers who got a response from management after raising a concern were dismissed.

And 60 per cent of those whistle-blowers did not get a response from management at all. There seems (see above item) some way to go in stabilising a still somewhat listing industry.