Barclays takes fine on the chin

The Financial Conduct Authority (FCA) has imposed a £38 million fine on Barclays for its failure to protect £16.5 billion worth of customers' custody assets held with the investment banking division between November 2007 and January 2012.

The shortcomings in Barclays' investment banking system meant that if the bank had failed, customers could have lost their assets or faced long delays or costs in recovering them. Personal and corporate banking is dealt with by separate divisions, so "high street" private and business customers were not at risk.

Barclays has already been fined £1.1 million for a similar offence in 2011. This latest fine is the highest ever levied by the FCA or its forerunner the FSA for failures over the security of clients' assets.

The fine relates to 95 custody accounts opened by Barclays' investment banking division across 21 countries during that period.

Failings

The FCA has rules in place to keep clients' property safe if a bank becomes insolvent, but Barclays did not implement them properly.

It failed to keep accurate records as to exactly which part of the investment banking division was responsible, nor did it set up the necessary legal provisions needed for custody services.

In addition, says the FCA, there was confusion over account names and other data, so that it would not have been clear what belonged to whom in the event of insolvency. Accounts would often hold both Barclays subsidiaries' assets and clients' assets.

Barclays also provided the FCA with inaccurate and incomplete returns for the accounts, the FCA found.

As a consequence the FCA says that if the bank had failed, court proceedings would probably have been necessary to distribute the contents of the accounts.

"Barclays failed to apply the lessons from our previous enforcement actions and numerous industry-wide warnings, and exposed its clients to unnecessary risk," commented Tracey McDermott, FCA director of enforcement and financial crime.

"All firms should be clear after Lehman that there is no excuse for failing to safeguard client assets."

This is the 16th fine imposed by the FCA for banks' failure to safeguard clients' assets or money properly. Other past offenders including Aberdeen, BlackRock and JP Morgan.

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