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LONDON (Alliance News) - Barclays PLC was Tuesday fined GBP37.7 million by the UK's financial conduct regulator for failing to properly protect GBP16.5 billion of clients' custody assets, meaning that clients risked incurring extra costs, lengthy delays or losing their assets if Barclays had become insolvent.
In a statement, the Financial Conduct Authority said the fine is the highest imposed by either it or its predecessor, the Financial Services Authority, due to "significant weaknesses" in the systems and controls in Barclays' investment banking division between November 2007 and January 2012. The fine exceeds a GBP33.3 million fine imposed by the FSA on JP Morgan Securities Ltd 2010 for similar failings.
It also comes after Barclays Capital Securities Ltd was in 2011 fined GBP1.1 million for failing to segregate client money intra-day for over eight years. At the time, the FSA said the failure increased the risk clients would have faced in the event of Barclays Capital's insolvency.
"Barclays failed to apply the lessons from our previous enforcement actions, numerous industry-wide warnings, and exposed its clients to unnecessary risk," Tracey McDermott, FCA director of enforcement and financial crime, said in a statement.
McDermott said there are no excuses for failing to safeguard client assets following the insolvency of Lehman Brothers in 2008. The FCA said Barclays failed to properly apply rules to protect client assets in the event of insolvency when opening 95 custody accounts in 21 countries. This meant that the bank's records did not correctly reflect which company within its investment banking division was responsible for the assets in the accounts.
Barclays also failed to set up appropriate legal arrangements with these companies, the regulator said.
The bank qualified for a 30% discount after agreeing to settle at an early stage, without which it would have been fined GBP53.9 million.
A Barclays spokesperson said the bank fell short of what is expected under regulations.
"Barclays identified and self-reported to the FCA the issues giving rise to the FCA?s findings and we accept their conclusion. Barclays has subsequently enhanced its systems to resolve these issues and to ensure we have the requisite processes in place. No client has suffered any loss as a consequence of this weakness in our processes which existed prior to January 2012," the Barclays spokesperson said in a statement.
Barclays shares were Tuesday quoted down 1.1% at 229.20 pence.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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