Barclays fined £26m for manipulating gold price
Friday 23 May 2014
Barclays' reputation came under renewed scrutiny today after it was fined £26 million by UK regulators for attempting to manipulate the price of gold.
The news came as the bank continues to face huge criticism over huge bonuses paid to its investment bankers despite falling profits. The Financial Conduct Authority described Barclays’ failures as “extremely disappointing”.
A former senior trader at the bank was also fined and banned from working in the City. It pointed out that the gold rigging occurred the day after Barclays had been fined £59.5 million by the FCA for its role in the Libor-fixing scandal.
The watchdog said that the bank’s own investigation into Libor should have highlighted its lack of controls in other price-setting mechanisms including gold.
Daniel Plunkett, a senior trader and director on Barclays’ precious metals desk, lied to the bank when it started an internal investigation following complaints from a client. He then continued to lie to the FCA.
Tracy McDermott, the FCA’s director of enforcement, said: “Traders who might be tempted to exploit their clients for a quick buck should be in no doubt — such behaviour will cost you your reputation and your livelihood.”
Antony Jenkins, Barclays chief executive, said: “We very much regret the situation that led to this settlement. Barclays has undertaken a significant amount of work to enhance our systems and controls and is committed to the highest standards across all our operations.”
The FCA’s investigation found that “Client A” had taken a massive, $43 million (£25.5 million) one-way bet on the gold price which only made it money if the fix at 3pm on June 28, 2012 was above $1,558.96.
The client paid $4.4 million for the bet, part of which went onto Plunkett’s trading book, but stood to make a profit of $3.9 million if the target price was hit.
Plunkett told his trading desk by email the day before that he was coming up to his “main event” and was hoping for a “mini-puke to 1558 for the fixing”. Mini-puke means a small price drop in the City.
Plunkett then placed a number of orders during the June 28 fixing which increased the likelihood of the fix coming in below $1558.
That meant Barclays did not have to pay the client $3.9 million and Plunkett booked a $1.75 million profit to his book. Although he did not profit directly from the deal it would, if undiscovered, have had a huge effect on his bonus for that year.
Client A complained to Barclays almost immediately after the afternoon fix was announced and the bank launched an internal investigation into Plunkett’s actions. It repaid the client the $3.9 million in full.
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