Salz Review - Wall Street Journal

65
Salz Review
An Independent Review of Barclays’ Business Practices
― “Making submissions which formed part of the LIBOR and EURIBOR
setting process that took into account requests from Barclays’ interest rate
derivatives traders. These traders were motivated by profit and sought to
benefit Barclays’ trading positions;
― Seeking to influence the EURIBOR submissions of other banks contributing
to the rate setting process; and
― Reducing its LIBOR submissions during the financial crisis as a result of
senior management concerns over negative media comment.” 109
6.58 The FSA found that Barclays had “failed to have adequate systems and controls in
place relating to its LIBOR and EURIBOR submissions processes until June 2010
and failed to review its systems and controls at a number of appropriate points”. 110
The FSA also found that LIBOR concerns had been escalated to Barclays
Compliance in the investment bank, but they had not been addressed effectively.
The FSA acknowledged that Barclays co-operated fully with the
regulatory investigation. 111
6.59 Marcus Agius, then Chairman of Barclays, said: “The Board takes the issues
underlying today’s announcement extremely seriously and views them with the
utmost regret. Since these issues were identified, the Authorities acknowledge that
Barclays management has co-operated fully with their investigations and taken, and
continues to take, prompt and decisive action to correct them.” 112
6.60 Although Barclays was the first bank to be fined for significant failings in relations
to LIBOR submissions, a number of other banks were also under investigation. 113
UBS and RBS have recently paid £940 million and £390 million respectively in fines
and penalties for issues related to the attempted manipulation of LIBOR. 114
6.61 Unlike most of the other events considered in this section so far, LIBOR concerns
the investment bank and raises questions as to whether behaviours might be more
commonplace on trading floors. We consider that these LIBOR events suggest
there were:
― Cultural deficiencies on the trading floor; indicative of a failure to embed clear
ethical values in this part of the Group;
― Ineffective front office supervision and controls, furthered by the lack of
separation or ethical walls between the trading teams and those submitting
data to the LIBOR and EURIBOR compilers;
― Flaws in the relevant functional controls so that breaches on the trading floor
were neither discovered nor dealt with on a timely basis – recognising that
until the problem was discovered, it had not been seen as presenting any
material risk;
109 FSA, “Barclays fined £59.5 million for significant failings in relation to LIBOR and EURIBOR”
(FSA/PN/070/2012), press release, 27 June 2012.
110 Ibid.
111 Ibid.
112 Barclays, “Barclays Bank PLC Settlement with Authorities”, press release, 27 June 2012.
113 CNN Money, “Nine more banks under scrutiny in LIBOR investigations”, 26 October 2012.
114 BBC news, “LIBOR scandal: RBS issued £390m fine”, 6 February 2013.