Questions Raised as Barclays Takes a Step Back

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A branch of Barclays in London.Credit Andrew Winning/Reuters
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Barclays is once again exposed.

In June 2012, the British bank was the first to settle claims that its staff tried to rig the London Interbank Offered Rate. It promptly lost its senior management and a good deal of its reputation. A decision this time round to hang back from an industry settlement for multiple failings in foreign exchange trading is harder to immediately assess. But it probably isn’t good news.

It is possible that Barclays’ delay is procedural. The ostensible reason is that the bank wants to coordinate its fines from the United States Commodity Futures Trading Commission and the Financial Conduct Authority  of Britain with those meted out by its other regulators in the United States and Hong Kong. Had it so wished, Barclays could have taken similar hits from the F.C.A, and C.F.T.C. suffered by UBS, Citigroup, JPMorgan Chase, the Royal Bank of Scotland and HSBC on Wednesday, according to a person familiar with the situation. That would have been about $618 million to $668 million.

Even if this is the whole story, it’s not good news. By settling early, the other five banks qualified for a 30 percent discount on their true fines. Depending on when Barclays does end up settling, it will save a little or a lot less.

And there’s always the chance that the eventual fine will not only be slightly bigger, but a lot. Unlike the other early settlers, Barclays is regulated by New York State’s Department of Financial Services, and its bank-bashing superintendent Benjamin M. Lawsky. He may simply have wanted more time to finish his investigation. But that could also mean that he is readying a bigger penalty.

Holding on just to be rewarded with a bigger penalty is an atypical definition of enhancing value for one’s shareholders. Yet if Mr. Lawsky threatened to withdraw Barclays’ New York banking license – as he is entitled to do – then coughing up more down the line would indeed be the lesser evil. A 2.2 percent share price drop on Wednesday suggests investors have recognized that Barclays is striving to minimize an inevitably bigger hit.

Big Banks Are Fined $4.25 Billion in Inquiry Into Currency-Rigging

Big Banks Are Fined $4.25 Billion in Inquiry Into Currency-Rigging

The fines come as regulators are increasingly targeting a business culture in the financial industry that they say encourages improper conduct by its employees.

George Hay is a columnist at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.