Barclays Plc was fined 26 million pounds ($44 million) by Britain’s markets regulator after a trader was found to have manipulated the price of gold in 2012, dealing a blow to Antony Jenkins’s attempts to rehabilitate the lender’s reputation.
The U.K. Financial Conduct Authority faulted the British bank for “failing to adequately manage conflicts of interest” with its customers between 2004 to 2013, according to the regulator’s statement. The FCA also fined the former trader, Daniel Plunkett, 95,600 pounds and banned him from the industry.
Plunkett “exploited the weaknesses in Barclays’s systems and controls to seek to influence” the gold fixing on June 28, 2012, according to the statement. His actions allowed Barclays to avoid making a $3.9 million payment to a client, though the bank later compensated the customer in full, the FCA said.
Plunkett’s actions took place the day after the London-based bank was fined a record 290 million pounds for manipulating the London interbank offered rate. That fine led to the departure of Robert Diamond as chief executive officer. Jenkins, who took over after Diamond’s exit, has since pledged to rebuild Barclays’s relations with regulators and politicians.
“Barclays has undertaken a significant amount of work to enhance our systems and controls,” Jenkins said in an e-mailed statement. “While there is much more to do to achieve the deep-rooted cultural change we embarked upon at the start of 2013, Barclays today has significantly changed for the better.”
Barclays couldn’t provide contact details for Plunkett and he wasn’t listed in the local telephone directory.
The fixing is a rate-setting ritual dating back to 1919 led by representatives of Barclays, Bank of Nova Scotia, HSBC Holdings Plc and Societe Generale SA. The banks hold daily conference calls at 10:30 a.m. and 3 p.m. where they discuss buying and selling the metal, starting from the dollar spot price, until a rate is agreed upon. The rate is used as a benchmark by miners, jewelers and central banks.
Deutsche Bank AG withdrew from the fixing last week as part of what the bank said is a wider scale-back in its commodities business. German financial-markets regulator Bafin has interviewed employees of the Frankfurt-based bank as part of a probe into potential manipulation of gold and silver prices.
The banks are considering overhauling the process and set up a steering committee to review the fixing as scrutiny of the benchmark has grown, Bloomberg News first reported in January. Academics and economists have argued knowledge gleaned on the fixing calls could give some traders an unfair advantage.
“It is essential that the regulators do what is necessary to give us confidence that the integrity of these markets is being maintained,” Andrew Tyrie, the chairman of the U.K. Treasury Select Committee, said today in an e-mailed statement.
Barclays entered into an option contract with a customer under which the client would only receive a payout if the gold fix that day exceeded $1,558.96, the FCA said. If the fixing was below that amount, Barclays wouldn’t have to pay anything.
On the evening of June 27, Plunkett e-mailed his colleagues saying he was hoping for a “mini puke to 1,558 for fixing.” The FCA said Plunkett meant a drop in the price of gold before the fixing on June 28.
Shortly after the fixing that day, the customer asked Barclays why it had settled below the barrier price, according to the FCA notice. Barclays started an internal probe and informed the regulator of the issue, according to a person with knowledge of the situation. The bank voluntarily repaid the customer what it would have been due had the fixing been above that price.
“Plunkett’s actions came the day after the publication of our Libor and Euribor action against Barclays,” Tracey McDermott, the FCA’s director of enforcement and financial crime, said in the statement. “The investigation and outcomes in that case meant that the firm, and Plunkett, were clearly on notice of the potential for conflicts of interests around benchmarks.”
The FCA has been visiting the banks as part of a review of the process to observe how the daily calls function, Bloomberg News reported last month.
The fixing banks were accused of manipulating the London gold fixing in a U.S. lawsuit filed in March by a New York resident. Kevin Maher said he bought and sold gold and gold futures and options and claimed the banks overseeing the century-old benchmark colluded to manipulate it.
Barclays gained 0.6 percent to 245 pence as of 1:47 p.m. in London.
“It’s another tick in the box, another piece of litigation to put aside,” said Chris Wheeler, banks analyst at Mediobanca SpA. “Twenty-six million obviously is not a lot but it’s another painful reminder of the things they’ve had to deal with post crisis.”