Investors in Royal Bank of Scotland PLC (LON:RBS) never saw the lender’s former boss Fred 'The Shred' Goodwin dragged into court over the fall-out from the 2008 financial crisis debacle, but Barclays PLC ‘s (LON:BARC) former CEO John Varley will be, which seems slightly ironic given the UK taxpayer never had to bail that bank out.
The Serious Fraud Office today announced that it will charge Barclays and four of its former executives, including Varley with fraud - the first criminal charges laid at the door of the very top bank executives relating to activities during the financial crisis.
The charges relate to a £7.3bn capital raising arranged by Barclays in 2008 with Qatar Holding LLC and Challenger Universal Ltd in June 2008, and a US$3bn loan facility the bank made available to the State of Qatar in November 2008.
READ: Barclays hit by SFO criminal charges related to 2008 emergency cash injection from Qatar
The capital raising provided Barclays with a lifeline during the financial crisis and helped it avoid a state bailout, unlike RBS and Lloyds Banking Group PLC (LON:LLOY).
Aside from the SFO move, the Financial Conduct Authority is also waiting in the wings to pounce with a decision from its own parallel probe into the 2008 capital raising, which was put on hold awaiting the SFO investigation outcome.
In 2013, the FCA said it would fine Barclays £50mln over the matter, but the investigation was deferred.
“Skeletons seem to be jumping out of lots of closets at once”
Laith Khalaf, senior analyst at Hargreaves Lansdown said: ‘Skeletons seem to be jumping out of lots of closets at once for Barclays.”
He noted: “The SFO hasn’t pulled any punches, and Barclays now finds itself facing yet another regulatory battle.”
“The bank is already facing litigation from the US Department of Justice and an FCA investigation into its current boss, Jes Staley, for trying to uncover the identity of a whistleblower,” the analyst said.
READ: Barclays chief Jes Staley investigated over whistleblowing claims
Khalaf added: “The spectacle of former executives being paraded through court will do nothing to strengthen the credentials of the bank, as it continues to try to execute its turnaround plan.”
Muted share price reaction reflects “misconduct discount’
“However,” he said, “the muted reaction in the share price highlights the fact that the SFO action was largely priced in, and more widely reflects the ‘misconduct discount’ which applies to the banking sector.”
In late morning trading, Barclays shares were 0.3%, or 0.6p lower at 206.15p, with the
Khalaf concluded: “Litigation, fines and compensation payments have sadly become part and parcel of the banking world, and while many of the alleged offences took place a long time ago, the costs and reputational damage are still very much a live issue.”