Salz Review - Wall Street Journal

Salz Review
An Independent Review of Barclays’ Business Practices
52
6. Conduct Matters
6.1 Our Terms of Reference require us to frame our recommendations around an
analysis of past events where the bank’s conduct had a negative impact on its
reputation. Most of these events began well before the 2008 financial crisis but only
came to a head after the crisis began. Some are still subject to regulatory
investigation, while others such as LIBOR involve legal actions. Some have already
resulted in financial penalties. Others such as PPI have resulted in continuing
compensation payments to customers. In all cases there has been damage to Barclays'
reputation and we have sought to understand the reasons for the inappropriate
conduct. This Review is, however, not a forensic investigation into these events and
we have not examined those areas which are subject to continuing investigations or
legal actions.
6.2 In this section, we begin by looking at the increasing attention paid by UK regulators
to conduct matters, and the increasing scale of the penalties imposed for conduct
failures by the UK and US regulators. We then analyse the specific events in the
following groups:
― Regulatory penalties for conduct failures;
― Sanctions;
― Products and advice;
― Operational failures;
― Treatment of customers;
― Inappropriate behaviour – the LIBOR scandal.
Regulatory Penalties for Conduct Failures
6.3 In the UK, the FSA has made enforcement actions backed by financial penalties a
key plank of its approach to regulation since it was set up in December 2001 under
the Financial Services and Markets Act 2000. The total value of fines imposed by the
FSA on all financial services businesses between 2002 and 2008 fluctuated in a fairly
narrow band of £5 million to £25 million a year. But in 2009, the quantum of fines
began to increase substantially, reaching £89 million in 2010 and £312 million in
2012 – despite a much smaller increase in the number of fines (see Figure 6.1).