It always helps to have some good news on your first day in a big new job, even if you can't claim the credit for it. So it must have been gratifying for Jes Staley, who has just taken over as chief executive of Barclays, to see shares in his new employer leading the FTSE 100 risers yesterday.
The upward spike wasn’t related to his arrival, which was announced to the City a month and a half ago, but a response to results of the Bank of England’s “stress tests” on Britain’s big lenders, which Barclays passed in better style than had been expected.
In fact, none of the seven lenders failed the hypothetical stress test scenarios, which ranged from plunging economic growth and a property crash in China to renewed recession in the UK, along with a lengthy period of deflation and a sharp fall in the housing market.
Two of the seven – Royal Bank of Scotland and Standard Chartered – were picked out as being weaker than the rest, but have since strengthened their balance sheets and none was required to raise any additional capital at this stage.
The bank gave notice, however, that lenders will in time be required to hold additional capital in preparation for another economic downturn, building up their so-called countercyliclical capital buffers (perhaps better described as “rainy day” money).
The bank is expected to raise the buffer next March but stressed that overall capital requirements for the UK banking system would be unchanged.
Second test
This was the central bank’s second annual stress test exercise and, for the first time, included misconduct risks for the seven lenders.
Emerging strongest from the doomsday scenarios was the only building society to be tested, the Nationwide. Along with RBS, Standard Chartered and Barclays, the other banks included in the exercise were Lloyds Banking Group, Santander UK and HSBC.
Delivering the stress test results yesterday, along with Threadneedle Street's financial stability report, Bank of England governor Mark Carney said the post-crisis period is now at an end for the UK's financial system.
But the bank made clear that it is keeping a watchful eye on the booming buy-to-let market and “stands ready” to take action to cool it down.
Over the past year lending to landlords has soared by almost 40 per cent, with such loans typically more risky and more vulnerable to interest-rate rises than those granted to owner-occupiers.
The bank will be looking to see whether lenders are relaxing their lending criteria for buy-to-let loans and will also monitor the impact on the market of an extra 3 per cent stamp duty announced last week by chancellor George Osborne in his autumn statement.
Back at Barclays, while yesterday marked Staley’s first official day in the office, the veteran American investment banker is understood to have arrived at the bank some weeks ago, keen to get on with the huge task ahead of him.
His first day may have been a good one, but it comes after a string of bad news for the bank. Just last week Barclays was fined £72 million (€102 million) by City regulator for failing to carry out sufficient checks on a so-called “elephant deal” ie, a transaction worth £20 million or more.
The Financial Conduct Authority said that, because of Barclays’ lax oversight of the near-£1.9 billion deal undertaken three years ago by its wealth management arm, the bank had risked being used to launder cash or fund terrorist activities. Barclays booked a profit of more than £50 million on the transaction.
Penalties imposed
It was the latest in an ever-lengthening list of penalties imposed on Barclays for poor conduct – and the largest-ever fine for financial crime failings – and takes the total bill for the bank’s misdeeds to little short of £500 million over the last six years.
Last month, in a sign of commitment to his new employer, Staley splashed out £6.5 million on a parcel of 2.8 million shares in Barclays.
Thanks to its clean bill of health in the stress tests, shares in the bank ended the day almost 5 per cent ahead, at 233.5p. That’s 0.5p above the 233p paid by Staley, leaving the banker ahead by a whisker on his investment.
Not much, perhaps, in comparison with his £8 million a year pay package – and the £2 million Barclays is forking out to compensate the new boss for bonuses at previous employer, JP Morgan – but another piece of good news on his first day at the office. Fiona Walsh is business editor of theguardian.com
