FSA letters reveal Barclays ‘misbehaviour’ over many years

Written on:July 11, 2023
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FSA's chairman Lord Turner's letter doubts Barclays (Image Courtesy: Bank of England)

A series of letters from the Financial Services Authority (FSA) to Barclays published in lieu of the Libor-fixing scandal reveal deteriorating trust between the bank and the City regulators, and concerns regarding the lender’s culture and behaviour over a period of many years.

The degeneration of culture resulted in Bank of England governor Sir Mervyn King telling the bank’s non-executives that boss Bob Diamond had to leave. A letter from FSA chairman Lord Turner to Agius in April reveals an address that pinches at the regulator’s trust in Barclays. Turner said the FSA developed the impression “that Barclays has a tendency continually to seek advantage from complex structures or favourable regulatory interpretations.”

Turner pointed to the “confusing and potentially misleading impression” created by Barclays of the size of its cash buffer, following stress tests by the European Banking Authority. The affair left senior regulators fearing that Barclays was “seeking to ‘spin’ its messages in an unhelpful fashion.”

The FSA was also worried that Barclays was overvaluing its complex assets to appear stronger than it was. A similar concern applied to the ‘Protium’ deal, where Barclays hived off £7.5 billion of toxic assets which were perceived by the FSA as a ‘convoluted attempt to portray a favourable accounting result’.

Another dispute about book-keeping left the FSA feeling that Barclays was “not fully transparent” and that it had caused unnecessary friction and burdened in FSA’s internal processes. Westminster sources said MPs had uncovered “glaring” discrepancies between his testimony and those of Agius and Bank deputy governor Paul Tucker.

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2 Comments add one

  1. Robert says:

    I don’t understand why these letters weren’t disclosed before. The FSA should not have left Barclays to continue with its wrongdoings.

  2. Sally says:

    A manipulation of this magnitude cannot happen overnight and Bob Diamond is your culprit.

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