Monday 23 April 2018
C002D5556
BUSINESS DAY
A15
FINANCIAL TIMES
COMPANIES & MARKETS
@ FINANCIAL TIMES LIMITED
UK financial watchdogs fail to bite in Barclays case Many are asking how committed the UK is to addressing light-touch regulation pany conduct.” CAROLINE BINHAM AND It is also at odds with earlier ofMARTIN ARNOLD ficial decisions: Bob Diamond, the es Staley, the chief executive bank’s chief executive in 2012, was of Barclays, was not the only ousted by the BoE over the Liborone being judged over his re- rigging affair, even though no regucent whistleblowing controversy. latory findings were levied against So, too, were the UK’s financial him personally. His predecessor, John Varley, is awaiting a jury trial watchdogs. They have been found wanting over criminal charges in a separate by many in the industry over the case stemming from an emergency test case, which has ended in a de- cash call involving Qatari investors cision not to ban Mr Staley for twice during the financial crisis. The head of the European operatrying to uncover the identity of a whistleblower. He will instead re- tions of a rival bank said: “Next time ceive a fine and will have his bonus the FCA comes to me and says you docked, with the expectation that did this thing wrong, I will just ask how that ranks on the scale comthis will total no more than £2m. It is the first public test of new pared to what Jes did . . . they have powers the regulators inherited made a pragmatic decision, not a after a string of scandals that taint- principled one.” There are also wider questions ed the reputation of the City of London, from benchmark-rigging about whether whistleblowers will to the mis-selling of payment now be deterred from stepping protection insurance. Designed to forward. “It’s the first time that a senior improve the tone from the top, the Senior Managers Regime gives the individual has been picked up over Financial Conduct Authority and the treatment of whistleblowers, the Bank of England the power to and we see that as a positive,” said fine and even ban senior manage- Francesca West, chief executive of Public Concern at Work, a charity. ment for failures on their watch. A ban would have meant the “However, the reality is that the end of Mr Staley’s City career, and fragile confidence built up recently Barclays would have been left look- has been undermined, and there ing for its fourth chief executive in is a big risk that now serious issues five years. But the decision to spare will not be raised.” There has already been a marked him — on the basis that the regulators had no evidence of a lack of in- drop in the past two years of people tegrity — has left some questioning sharing that confidence. In 2016how committed the UK is to leaving 2017 the FCA dealt with 900 whistleblowing cases, down from 1,340 two light-touch regulation in the past. “This decision is disturbing years earlier. The Barclays case was on the and conflicts with UK regulators’ face of it clear-cut: Mr Staley had stated desire to better protect whistleblowers,” said Erika Kelton, already issued a mea culpa last year a lawyer at Phillips & Cohen who for twice trying to unveil the idenspecialises in whistleblower cases. tity of a whistleblower in 2016 who “Simply put, it’s a victory for execu- wrote anonymously to the bank’s tives who brook no challenges to board detailing allegations against corporate behaviour and a loss for Tim Main, Mr Staley’s recent recruit employees who do nothing more and former colleague at JPMorgan than express concern over com- Chase.
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German wholesaler Metro cites Russia as it warns on profit JONATHAN ELEY
Crash and carry. etro, the German-based wholesaler, has warned on profits. Earnings before interest, tax, depreciation and amortisation are now expected to rise “slightly” in the current financial year, excluding exceptionals and currency movements. Previously, it had expected growth of 10 per cent. Sales are expected to grow 0.5 per cent at constant currency, half the rate previously forecast. Russia is the main culprit, according to the company’s statement: “Metro had expected a significant improvement of the sales development in Russia for the second half-year. Instead, the management board now — also because of the further deteriorating geopolitical situation — expects sales in the
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second half-year to stay behind expectations. Furthermore the repositioning of the business will incur higher additional cost in the second half-year than previously expected. It also said negotiations with unions at Real, its German hypermarket operation, have ended without agreement, and that an interim solution will impact earnings. Bruno Monteyne, European food retail analyst at Bernstein, said the company’s management was losing credibility. “Until a few weeks ago, they felt very comfortable that they budgeted enough investment in Russia to kick start growth again,” he said in a note to clients. He added it was unlikely the wage talks affected earnings much, given that they had been dragging on for months. Metro shares closed down almost 11 per cent in Frankfurt. The company reports half-year results on May 15.
Slide for US tech stocks weighs on Wall Street Apple extends fall after TSMC comments, Trump rattles oil markets DAVE SHELLOCK
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hat you need to know • S&P 500 down 0.9%, Nasdaq Composite 1.2%,lower • Government bond sell-off loses steam • Chipmakers down as Apple supplier TSMC forecasts weak smartphone demand • Oil retreats after Trump tweets that prices are “artificially very high” • Euro under pressure ahead of ECB meeting as dollar firms • Sterling retreats after Bank of England governor casts doubt on May rate rise Overview US stocks ended the week on a downbeat note, as the technology and energy sectors came under pressure from concerns about demand for smartphones and as oil prices continued to retreat from 40-month highs. This week’s sell-off in US and German government bonds showed signs of running out of steam, but not before the yield on the 10-year Treasury
hit a fresh one-month intraday high of 2.943 per cent. Gilt yields fell sharply — along with sterling — reflecting a further reassessment of the UK rate outlook. In New York, the tech-heavy Nasdaq Composite index was down more than 1 per cent, with Apple extending the previous day’s 2.8 per cent drop by a further 3.5 per cent by midday. Taiwan Semiconductor Manufacturing, one of the iPhone maker’s biggest suppliers, warned on Thursday of “weak demand” from the mobile phone sector, heightening concerns about a slowdown in smartphone sales. “Potentially, the TSMC guidance is the first warning shot that the global economy is slowing down faster than expected,” said Peter Garnry, head of equity strategy at Saxo Bank. “The main question is then whether this is the beginning of a secular trend or is it just short-term cyclical effects.” Meanwhile, President Donald Trump pulled the rug from under the oil markets as he criticised Opec for
driving prices “artificially high” — a day after Brent crude touched $74.75 a barrel, the most expensive since late 2014. “It won’t have escaped Mr Trump’s attention that rising gasoline prices can quickly eclipse any financial benefits to rust-belt America from his tax cuts,” noted Jasper Lawler, head of research at London Capital Group. Elsewhere, participants kept a wary eye on government bond markets following a 10 basis point rise in the 10-year Treasury yield over the course of the week, with the German Bund yield up 8bp over the same period. The US yield curve continued to steepen — albeit modestly — following a lengthy period of flattening that the saw the gap between two- and 10year yields hit the lowest for a decade. “The probability, according to Bloomberg, of four Federal Reserve rate hikes in 2018 is now at the highest of the year, at around 33 per cent from 18 per cent at the start of last week,” noted Jim Reid, strategist at Deutsche Bank.
UK regulators criticised for fine on Barclays chief Chief executive Jes Staley escapes ban for attempting to unmask whistleblower CAROLINE BINHAM, MARTIN ARNOLD, KATIE MARTIN AND PATRICK JENKINS
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K regulators have been criticised for being too soft on Barclays chief executive Jes Staley after they decided to fine him for trying to unmask a whistleblower but concluded he will not be banned over the affair. In the landmark decision, Barclays will avoid any sanctions by the Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority for sloppy whistleblowing systems after the bank moved to tighten up processes. The regulators’ decision is a relief for Mr Staley, who is not expected to be sanctioned more than £2m, including a board decision to dock his pay, according to people familiar with the investigation. But the move raises questions about whether the regulators have been too soft, particularly when they are trying to bed down new whistleblowing rules to give more protection to those who come forward to call out bad behaviour. The case was also the
first big test of the UK’s new regime to hold senior financial managers to account. “This is not just some technical flouting of the rules,” said Mary Inman, a lawyer at Constantine Cannon who represents whistleblowers. “Jes Staley has flouted two of the key stop-guard measures regulators put in place to prevent a repeat of the financial crisis. The response to not take action against the bank and to fine Jes Staley an unspecified amount feels very weak. I’m very disappointed.” The decision by the regulators removes a large cloud hanging over both the bank and Mr Staley, whose fate was in the balance. The watchdogs could have decided that he should be blackballed from financial services for a lack of integrity for twice trying to uncover the identity of an anonymous whistleblower who had written to the bank’s board to make allegations about a recently recruited colleague. “It does look as though they have gone soft in that they could have been more severe,” said Dino Bossi, former head of investigations and whistleblowing oversight and policy at Barclays who now advises companies
on whistleblowing. “This could be an example of where the regulator has bitten but it has only got gums.” Mr Staley will become the only sitting chief executive of a large UK financial institution to have received a fine from the regulators. Yet rival bankers said the regulator should have been tougher. “If I had done this, I’d be out on my ass and anyone who worked for me who did this would have to go, I don’t care what their explanation is,” said the European head of a global bank. “This undermines the FCA’s moral authority.” It is not the end of the matter: the New York State Department of Financial Services, known for its tough stance on banks, is also investigating and is yet to make any determination. Barclays said it was co-operating with the US watchdog. Shares in Barclays rose 1.3p to 215.5p on Friday. A top 10 shareholder in Barclays said: “This was a close call. I think it is a reflection of how difficult a position the regulators were in, but also how difficult it would be if Barclays was to lose its fifth chief executive in seven years.”