Barclays Fine Insubstantial

The £37.7 million fine is small relative to Barclays' £8 billion of shareholders equity and the £3 billion that equity analysts expect the bank to earn this year

Erin Davis 25 September, 2014 | 9:55AM
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Barclays (BARC) was fined £37.7 million by the U.K. Financial Conduct Authority for failing to keep proper records and appropriately safeguard client financial assets worth approximately £16.5 billion. Barclays' investment bank had placed the assets with third-party custodians between 2007 and 2012.

An FCA investigation found that Barclays failed to properly record which custodian bank held the assets in at least 95 accounts, and that in some cases seemed to incorrectly report that the assets belonged to Barclays rather than the clients. The FCA considers this to be a serious issue, as the importance of proper record-keeping was highlighted in the wake of Lehman, when some clients were unable to access their funds. Barclays paid a fine of £1.1 million in 2011 for similar missteps.

The £37.7 million fine is small relative to Barclays' £8 billion of shareholders equity and the £3 billion that we expect the bank to earn this year, and we do not expect it to affect our fair value estimate for the no-moat bank. The fine is also small relative to the £3 billion of regulatory fines that we have pencilled in for Barclays over the next several years, although it does highlight that regulatory and legal risk remains elevated for global banks.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Barclays PLC180.70 GBX1.40Rating

About Author

Erin Davis  is a senior banking analyst for Morningstar.

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