Salz Review - Wall Street Journal

More documents

Recommendations

Info

55 Salz Review An Independent Review of Barclays’ Business Practices Sanctions 6.9 Barclays, like other banks, has experienced problems in complying with sanctions aimed at restricting the financial dealings of individuals or organisations which governments believe may be involved in terrorist, narcotics or other criminal activities. The sanctions rules, which relate to customer account openings and payments, are complex and apply to a huge number of transactions undertaken by banks. In the US, they cover countries and a list of “specially designated nationals” containing thousands of entries of individuals’ names and aliases. 6.10 In August 2010 Barclays agreed to pay almost $300 million to the DoJ and New York District Attorney’s Office and $176 million to the Office of Foreign Assets Control (OFAC) for breaches of US Sanctions. The settlement related to Barclays’ handling of $500 million in money transfers from banks in US-sanctioned countries including Cuba, Iran, Sudan, Libya and Burma between 1995 and 2006. Barclays was alleged to have removed details from payments to hide the identity of these recipients. Under the terms of the settlement, Barclays agreed to implement specific conditions, including new training and compliance programmes, in return for the dismissal of the sanctions charges – which happened in December 2012 when a US federal judge agreed that Barclays had met the conditions. 6.11 Sanctions violations, especially relating to US rules, are an industry-wide issue. Since 2010, LBG has incurred sanctions-related costs of $350 million, Credit Suisse $536 million, RBS (via ABN AMRO) $500 million, ING $619 million and Standard Chartered $327 million. In the UK, the FSA fined RBS £5.6 million in 2010 for failing to have adequate systems and controls to prevent breaches of UK financial sanctions. 6.12 There is no doubt that compliance with sanctions requirements is an extremely complex undertaking for global banks such as Barclays. Since the requirements stipulate that banks should be able to screen individual transactions, banks require sophisticated IT monitoring systems capable of monitoring huge numbers of transactions every day. 6.13 Despite the practical challenges, we have concluded that Barclays’ sanctions breaches suggest inadequate operational level computer systems, processes and training. They also suggest that there may have been an underinvestment in monitoring compliance, risk and other control processes as legal and regulatory requirements have intensified and the business has become more complex. However, we note that Barclays has now increased their management focus on the importance of compliance with sanctions requirements and also restructured these processes since the incidents occurred. Products and Advice 6.14 Concerns have grown in recent years about financial services organisations selling inappropriate products to customers, particularly individuals and small businesses with limited understanding of more complex financial matters. Regulators have
Salz Review An Independent Review of Barclays’ Business Practices 56 imposed fines for mis-selling and required the payment of compensation to customers running into hundreds of millions or even billions of pounds in total. In this sub-section, we look at the instances where Barclays is alleged to have missold products or given unsuitable advice. Payment Protection Insurance 6.15 Payment Protection Insurance (PPI) policies are designed to provide help for borrowers to repay loans if they lose their income for a period. They are potentially a valuable product for customers, and Barclays, like other banks, has been selling PPI or equivalent products for around 30 years. In the UK it became common practice for banks to package the cost of PPI in the interest rate quoted to the customer. 6.16 However, a number of concerns became apparent which led to accusations of misselling of PPI. These included: ― High-pressure sales tactics such as giving borrowers the impression that they had to buy PPI to get a loan; ― Legal exclusions which meant claims could not be made in some cases such as back pain and stress, common causes of absence from work; ― The sale of PPI policies to customers who were self-employed and not eligible to claim; ― The sale of policies to people with no income to protect; ― Requirements for customers to opt out of the product rather than opt in – which in some cases meant that they were unaware that they had taken out a PPI policy; ― Single-premium policies which did not refund part of the premium if the loan was repaid early. 6.17 In 2009, the FSA estimated that PPI mis-selling may have affected around three million people in the UK since the 1990s. 90 Barclays was one of the banks identified. 6.18 The businesses in Barclays selling the most PPI products were the Retail Bank, Barclaycard and FirstPlus (acquired with Woolwich in 2000). There are several indicators that PPI was an important and profitable part of Barclays’ retail banking and credit card businesses. For example, PPI comprised between 32% and 42% of Barclays’ UK retail and business bank pre-tax profit between 2001 and 2005, when almost 70% of borrowers taking some loan products also bought a policy. Indeed the penetration rate of PPI sales was a key performance indicator used by Barclays. Gross premiums from Barclays PPI sales exceeded £400 million per annum between 2003 and 2008, falling to £346 million in 2009, £264 million in 2010, and less than £200 million per annum thereafter (mainly due to the fact that Barclays was still collecting premiums for regular premium policies taken out in previous years). The cost of meeting claims on Barclays PPI policies has been under 25% of gross premiums in every year since 2002. Overall, between 2002 and 2012, Barclays’ total 90 Guardian, “Three million in the queue for compensation over PPI mis-selling”, 10 August 2012; based on: FSA, FSA confirms measures to reform PPI market and protect consumers, August 2010.
Page 1:
0 Salz Review An Independent Review
Page 4 and 5:
Salz Review An Independent Review o
Page 6 and 7:
Page 8 and 9:
Page 10 and 11: 5 Salz Review An Independent Review
Page 16 and 17: 11 Salz Review An Independent Revie
Page 40 and 41: 2012 167 1993 1994 1995 1996 1997 1
Page 58 and 59: 2002 2003 2004 2005 2006 2007 2008
Page 106 and 107: 101 Salz Review An Independent Revi
Page 108 and 109: 103 Salz Review An Independent Revi
Page 110 and 111:
105 Salz Review An Independent Revi
Page 112 and 113:
Page 114 and 115:
Page 116 and 117:
Page 118 and 119:
Page 120 and 121:
Page 122 and 123:
Page 124 and 125:
Page 126 and 127:
Page 128 and 129:
Page 130 and 131:
Page 132 and 133:
Page 134 and 135:
Page 136 and 137:
Page 138 and 139:
Page 140 and 141:
Page 142 and 143:
Page 144 and 145:
Page 146 and 147:
Page 148 and 149:
Page 150 and 151:
Page 152 and 153:
Page 154 and 155:
Page 156 and 157:
Page 158 and 159:
Page 160 and 161:
Page 162 and 163:
Page 164 and 165:
Page 166 and 167:
Page 168 and 169:
Page 170 and 171:
Page 172 and 173:
Page 174 and 175:
Page 176 and 177:
Page 178 and 179:
Page 180 and 181:
Page 182 and 183:
Page 184 and 185:
Page 186 and 187:
Page 188 and 189:
Page 190 and 191:
Page 192 and 193:
Page 194 and 195:
Page 196 and 197:
Page 198 and 199:
Page 200 and 201:
Page 202 and 203:
Page 204 and 205:
Page 206 and 207:
Page 208 and 209:
Page 210 and 211:
Page 212 and 213:
Page 214 and 215:
Page 216 and 217:
1993 1994 1995 1996 1997 1998 1999
Page 218 and 219:
1993 1994 1995 1996 1997 1998 1999
Page 220 and 221:
1993 1994 1995 1996 1997 1998 1999
Page 222 and 223:
Page 224 and 225:
Page 226 and 227:
Page 228 and 229:
Page 230 and 231:
Page 232 and 233:
Page 234 and 235:
Page 236 and 237:
Page 238 and 239:
Page 240 and 241:
Page 244:
Salz Review - April 2013
show all

Salz Review - Wall Street Journal

Create successful ePaper yourself

Delete template?

Save as template?