Barclays chairman warns on FX regulation
The foreign exchange market needs “fine tuning” rather than heavy handed reform, the chairman of Barclays argued on Thursday, as he unveiled a new compliance academy aimed at raising standards within the bank.
Sir David Walker said that while the forex market was “vulnerable to taint” it had worked well for a very long time and that the focus now should be on ensuring better conduct by traders.
“There is some very intelligent, sensitive fine-tuning needed, but we should be wary of throwing the baby out with the bathwater,” he said.
Barclays is one of a handful of market-leading forex dealers that are at the centre of a global investigation by more than 15 authorities into alleged collusion and rate-rigging in the $5.3tn a day currency markets.
Its directors have been attempting to clean up the bank’s reputation in the wake of the Libor manipulation scandal but have struggled to win over sceptics amid further enforcement probes.
Last week the bank hit a fresh setback with a lawsuit filed by New York’s attorney-general alleging that Barclays mislead institutional investors about the presence of high-speed traders in its dark pool electronic trading venue.
Announcing its bid to deliver higher standards, the bank said it was spending tens of millions of pounds on a new “compliance career academy” in partnership with Cambridge Judge Business School.
Sir David said he wanted it to become a “world centre in excellence”, acting as a benchmark for compliance and leading to the creation of a new certificate in compliance.
Training of Barclays’ 2,100 compliance officers would take them beyond the job of policing fellow employees and encourage them to “mentor” colleagues on their behaviour. Barclays spends £300m a year on its compliance function.
Sir David said it was “wholly appropriate” that regulators now look at the forex market and that some oversight may be needed, but that it was important not to “spoil” a market that worked effectively for most clients. George Osborne, the UK Chancellor, last month announced powers to regulate Libor would be extended to other benchmarks including forex.
He acknowledged that the “animus” against banks was not going to go away soon, arguing that the current environment meant that banks were being treated as guilty until they proved themselves innocent.
“I’m sorry to say that there will be accidents from time to time,” Sir David said at an event to announce the compliance academy. “They are not evidence of the failure of what we are rolling out. They are indicative that it takes time. We always have been very clear some of this stuff will take 5-10 years.”
Barclays, the third-largest bank globally in the forex market, has placed at least six traders on leave across New York and London in connection with its internal probe. The British lender has said in public disclosures that it was reviewing its forex trading covering a several year period until October 2013 and that it is co-operating with the relevant authorities.