Whether Barclays Bank Manipulated Information and Employed Misconduct Practice - Assignment Example

The paper "Whether Barclays Bank Manipulated Information and Employed Misconduct Practice " is a perfect example of a finance and accounting assignment. Barclays is one of the leading financial services providers that engage in personal corporate and investment banking as well as wealth and investment management. The main purpose of this report is to find out whether Barclays Bank manipulated information and employed misconduct practice regarding its compliance with risk management and governance. We used secondary sources of information to conduct our research after which we analyzed our findings

Discussion and Analysis

According to Warren, (2007), The FSA risk-based approach aims at those risks that may undermine its four statutory objectives which are consumer protection, public awareness, reducing financial crime and market confidence. Any organization that puts a risk to the four statutory objectives of FSA does not comply with the FSA's Principles for Business and this automatically leads to fines, enforcement and permission will be withdrawn. According to Cuddy (2004), good compliance practices are not only for the good of the business but for the customers and all investors as well to assure them that they are dealing with a financial institution that is well managed. Leading financial institutions are those that are able to balance compliance requirements with process efficiency as well as the customer experience. The risk of non-compliance is always followed by financial penalties and risks of spoiling your reputations as a financial institution. There is also need for all the financial institutions to know how the rules and regulations they are supposed to comply with will affect their members (Collver, 2010)

According to Hua (2012), the Barclays scandal of manipulating Libor started back in 2005. There is evidence from the FSA report that as early as 2005, Barclay's bank was still trying to manipulate dollar labor as well as the euro zone’s equivalent of Libor (Euribor) as they were being requested by other banks and derivative traders. One of the money managers who was interviewed said that what the bank had done to manipulate the Libor and the Euribor was as serious as poisoning a water supply. After Barclays Bank admitted to the misconduct, several of the senior employees started resigning. To start with were the CEO of Barclays, Robert Diamond, then the Chief operating officer Jerry del Missier and then Chairman Marcus Agius. The impact of the Libor and Euribor is said to have affected the pension funds seriously.

According to BlanchFlower (2012), during the financial crisis in 2007 many of the banks stopped lending money to each other as they were concerned with the health of their finances. However, the Barclays bank manipulated the submissions of Libor so as to give a healthier picture of the credit quality of the bank as well as its ability to raise funds. The Libor submissions by Barclays were higher than the other contributing banks. The issue with this was that the derivative traders who were working for Barclays Bank were claiming that they were actually borrowing money from the Bank at a lower rate than the real rate. This placed Barclays in a better position than it actually was something that led to people raising eyebrows at the real situation of the bank. What remains unclear about this is how the traders would have done this without the permission of the senior management. 

After negative media comments, the senior managers asked the employees to reduce the Libor submissions so as to avoid negative publicity by the media. The bank also put in places enough systems and controls related to the submission of Libor and Euribor. It did not put this in place until June 2010. The bank also did not deal with issues about the labor submissions that later spread to the Bank’s investment compliance function between 2007 and 2008. According to McDermont of FSA, it was unacceptable for Barclays to make a submission so as to benefit its trading position. Such a thing was only possible because the Bank had not put in place proper controls. He said that Barclay’s misconduct had by far threatened the integrity of the Libor and done serious harm to all the market participants (Natalie, 2012).

Conclusion

The main aim of this review is to find out whether Barclays Bank manipulated information and employed misconduct practice regarding its compliance with risk management and governance.  From the analysis above, it is clear that the Barclays bank was involved in the manipulation of Libor as early as 2005 and because of that it put the Libor at risk as well as threatens the stability of the financial system. For this reason, FSC was justified to fine Barclays bank as it failed to comply with the governance of FSA.