In the City, it’s known as “the L’Oréal moment” – when a boss decides to take the bonus his board has offered “because I’m worth it”.
Barclays boss Antony Jenkins has just enjoyed his first L'Oréal moment since taking over from Bob Diamond three years ago, accepting a bonus of £1.1 million for 2014, bringing his total pay package to £5.5 million (€7.6 million).
Justifying the extra payment, which the Barclays chief executive declined the previous year, Jenkins said yesterday that the bank had “come a long way” over the past 12 months. “We have made very good progress. The bonus is recognition of that and I decided to accept it on this occasion.”
Forex rigging
It is true that Barclays has made progress in cleaning up the casino culture that ran out of control under the discredited Diamond, but its balance sheet still bears the scars: the group has been forced to set aside another £750 million to cover potential penalties for manipulating the foreign exchange market, taking its total liability to £1.25 billion.
It’s by no means clear that this will be the bank’s final tally for forex rigging, which is only one of a raft of regulatory and legal challenges it is facing. In payment protection mis-selling, for example, another £200 million was added to the bank’s bill, and it is still fighting a £50 million fine from the City regulator over its controversial fund-raising at the height of the financial crisis.
Among a lengthy list of legal warnings accompanying its results, the bank also revealed that it is involved in an investigation by the US authorities into precious metals trading.
There was progress on the profits front, with adjusted profits (the bank’s preferred measure) rising by 12 per cent to £5.5 billion. That figure excludes the hefty forex provision, however, and at the pre-tax level profits tumbled by more than 20 per cent to £2.3 billion. If all the exceptional items are thrown in, Barclays actually made a net loss last year of £174 million.
Among the worst performing parts of the business was Barclays’ investment banking arm, where profits crashed by more than 30 per cent, to £1.4 billion. The overall bonus bill has been cut back by more than a fifth, to £1.9 billion, reflecting in part the heavy job reduction programme underway at the bank, and the number of employees receiving more than £1 million last year shrank from 481 to 359.
Jenkins made it clear that there will be further cutbacks in the investment banking business if its performance fails to improve. It is in the process of axing some 7,000 jobs, representing a quarter of numbers employed in the investment banking arm.
Investigations
As Barclays was detailing its mounting forex rigging liabilities yesterday, Bank of England governor
Mark Carney
was also on the spot over the role played by the central bank in the scandal. In a tetchy session at Westminster, he was grilled by MPs on the treasury select committee and faced repeated questioning over whether the Bank had failed to act when alerted to the potential manipulation of the £3.5 trillion a year currency trading market.
Bank officials were cleared of any wrongdoing in a review last year by Lord Grabiner, but it has faced accusations that the investigation was not rigorous enough. The firing of the Bank's chief currency dealer, Martin Mallett, a day before the Grabiner report was released also added to the concerns.
Admitting the Bank’s reputation had been harmed by the scandal, Carney defended its conduct, but cleared up some of the mystery surrounding Mallett’s abrupt departure. He revealed the dealer had been involved in 20 instances of misconduct, including inappropriate language and emails and breaching the Bank’s confidentiality rules.
Mallett had also failed to pass on concerns expressed by a trader about potential market manipulation, which Carney said amounted to serious misconduct.
The Bank of England governor stressed lessons had been learned and staff training stepped up – as a result, some 50 cases of potential misconduct have been flagged up at the bank in recent months, and 40 have now been passed on to the City regulator for further investigation.
The more rigorous process adopted by the central bank in identifying market manipulators is certainly to be welcomed. But that fact that the tough new approach has thrown up so many potential offenders is a cause for concern – either the bank's officials are being over-zealous in their concerns or the true scale of abuse in the City is even greater than anyone had imagined. Fiona Walsh is business editor of theguardian.com
