Barclays Stops Speculative Agricultural Commodity Trading

Barclays Plc, the U.K. bank fined a record 290 million pounds ($454 million) for interest-rate manipulation, stopped speculative trading of agriculture commodities as part of an effort to scale back businesses that risk its reputation.

The decision was made for “reputational reasons,” Antony Jenkins, the bank’s chief executive officer, told reporters on a call today after London-based Barclays reported its first full-year loss in two decades. Barclays suspended research in farm products, two people familiar with the decision said Jan. 28.

Speculation by banks amplified food price surges in 2010 and 2011, and Barclays was the largest U.K. bank involved, the London-based World Development Movement, an anti-poverty campaign group, said in a statement today. Berlin-based Foodwatch said in October that Frankfurt-based Deutsche Bank AG and other financial companies were partly responsible for famine in some of the poorest countries as agricultural speculation raised food prices.

Deutsche Bank said last month it would continue to provide agricultural-investment products after concluding that they’re not the cause of higher farm commodity prices.

Barclays announced the change today as it unveiled plans to cut 3,700 jobs to reduce annual costs by 1.7 billion pounds following its fine in June for interest-rate manipulation.

75 Units

The bank has reviewed 75 of its units to weed out those that pose a reputational risk or don’t make profits. The firm will shut about four that consume about 90 billion pounds of assets and may shut a further 17 that generate about 2 billion pounds of income, Jenkins told reporters at a briefing in London’s Westminster district today.

Barclays was the largest bank in the U.K. involved in speculation on food including wheat, corn and soybeans, making an estimated 500 million pounds in 2010 and 2011, the World Development Movement said in the statement. Food prices as tracked by the United Nations’ Food & Agriculture Organization doubled in the past 10 years, and wheat was the biggest gainer of 24 commodities in the Standard & Poor’s GSCI gauge last year.

“Public opinion does not see food speculation as an acceptable activity,” the World Development Movement said in the statement. “Without strong new regulation, Barclays is free to start speculating again at any time.”

Commodities Trading

Barclays’ commodities trading staff is down by a third as value-at-risk, a measure of how much the bank estimates it might lose in a single day, was cut in half last year, the bank said. Daily average commodity value-at-risk fell to 6 million pounds from 12 million pounds in 2011, the bank said today.

Barclays posted a net loss of 1.04 billion pounds for 2012, as it set aside an additional 1 billion pounds in the fourth quarter for compensating clients wrongly sold interest-rate swaps and loan-repayment insurance.

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