Barclays PLC Fined Over Attempt To Fiddle The Gold Price

It’s not often that bankers get anyone’s sympathy these days, but I am starting to feel sorry for the rank-and-file staff at Barclays (LSE: BARC) (NYSE: BCS.US).

Over the past few years their company has rarely been out of the news pages, and for all the wrong reasons, most notably with the LIBOR-fixing scandal that culminated in the resignation of Barclay’s controversial chief executive Bob Diamond in 2012.

This week’s scandal — a successful attempt to move the gold price for Barclays’ benefit against a customer, and the £26 million fine from the regulators that has resulted from it — will not claim the head of Diamond’s replacement, Antony Jenkins.

But Barclay’s current chief exec and its 140,000 staff (or at least those who expect to remain after Jenkins’ upcoming headcount cull in the investment banking division) must long for the day when they don’t have to apologise for where they work at parties. 

BarclaysGold finger

It’s always been unfair to tarnish such a huge workforce with the same brush, of course, but it’s particularly true in the case of this latest knock to Barclay’s reputation.

You see only one Barclays’ trader — who has since been sacked — was implicated by UK regulators as having attempted to fix the price of gold.

The Financial Conduct Authority (FCA) says the trader “exploited weaknesses in Barclays’ systems and controls” to try to influence the gold price — Barclays being one of only four London banks that join together twice a day to decide the price of gold based on supply and demand.

The trader, Daniel James Plunkett, created fake orders in an attempt to push down the price of gold ahead of the price setting deadline. His actions were successful, and as a result Barclays avoided making a $3.9m payment to a customer, and Plunkett booked a $1.75m profit for the bank.

The FCA said this was possible because the bank “failed to adequately manage conflicts of interest between itself and its customers” in setting the price of gold.

Both Barclays and the trader — who was also fined — agreed to settle at an early stage, which reduced the total fine they paid.

Investors in a fix

Is this a case of one (more) bad apple, or does it signify that the wider culture at the bank was rotten?

That’s been the £40 billion question for £40 billion Barclays for years now.

Jenkins himself said in response that Barclays “very much” regretted the situation and that it has “undertaken a significant amount of work to enhance our systems and controls and is committed to the highest standards across all our operations.”

A good thing too, because what will dismay even those who have some sympathy for the under-fire institution is that this rogue behaviour took place on June 28, 2012.

What’s the significance of the date? It was the very next day after Barclays was fined £290m by the FCA and US authorities in relation to that LIBOR-fixing scandal!

At the very least it gives credence to those who said mere fines wouldn’t change behaviour at the big banks – something Jenkins himself claims to have taken on board with his purported root-and-branch revamp of Barclay’s corporate values.

Cheap for a reason?

If Jenkins has succeeded in truly changing Barclays, and if there are no more skeletons in the cupboard, then the bank does look cheap.

At 245p it is trading well below the net tangible asset value per share of 284p it announced with its interim results at the start of the month.

That seems a steal, but you do need to be confident that these scandals of the past are finally being put to bed -- and that other rogue staff at the company aren't sowing the seeds for some future debacle out-of-sight, too. You'll also need enough confidence that the bank is going to make good profits in the future, despite greater regulation and the much-changed landscape for banking.

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Owain does not own shares in Barclays.