23rd September 2014
Barclays has been handed a record £38 million fine for failing to separate clients’ money from its own.
Today’s penalty from the Financial Conduct Authority (FCA) follows a payout of £1.1 million by the bank three years’ ago over similar failings.
Barclays’ investment division put £16.5 billion of clients’ cash at risk between 2007 and 2012, the FCA revealed.
However, the bank says it did not profit from this error and no customers lost money.
The lack of segregation of customers’ money meant they were exposed to the risk of extra costs, delays or the loss of their assets if Barclays had become insolvent.
The importance of ring-fencing clients’ money was underlined during the credit crisis after several global financial businesses failed or had to be bailed out.
The watchdog says that the proper safeguarding of assets is vital to maintaining market confidence and that Barclays’ failings were “unacceptable”.
Tracey McDermott, FCA director of enforcement and financial crime, says: “Barclays failed to apply the lessons from our previous enforcement actions, numerous industry-wide warnings, and exposed its clients to unnecessary risk.
“All firms should be clear after Lehman that there is no excuse for failing to safeguard client assets.”
Barclays made mistakes in the way it classified 95 custody accounts in 21 countries, which meant that its records did not reflect which of the companies within its investment division was responsible for the assets.
Errors in the naming of accounts and in the legal arrangements suggested the assets belonged to Barclays rather than its clients.
This is the highest fine ever imposed by the FCA or its predecessor the FSA for client assets breaches and the size of the penalty reflects the “significant weaknesses” in Barclays’ systems as well as the number of affected accounts.
Barclays settled early, which meant the fine was reduced by 30 per cent from nearly £54 million.