Legal Business Blogs

Rumbling on: Barclays sets aside £800m to cover foreign exchange penalties as Deutsche profits hit by legal costs

Despite the spate of large scale settlements banks continue to set aside large provisions for legal spend with the latest, Barclays, setting aside £800m for investigations and litigation primarily relating to foreign exchange manipulation while Deutsche Bank put aside €1.5bn in the first quarter of 2015.

The figure has been released as the bank announced a 26% decrease in quarterly statutory profits to £1.34bn with it also setting aside an additional £150m provision for PPI redress. The last quarter of 2014 saw Barclays’ provision of funds set aside for Forex liabilities swell to £1.25bn. An additional £200m was allocated to redress customers mis-sold payment protection insurance. The Forex provision was enough to lead to a sharp fall in the booked profit of Barclays’ investment banking arm.

In November it opted out of a major settlement reached by five banks with UK and US regulators for allegedly failing to stop traders from trying to manipulate the foreign exchange market, with HSBC, Royal Bank of Scotland, UBS, JP Morgan Chase and Citibank collectively levied a £2bn fine.

The news follows Deutsche Bank’s announcement days ago of a sharp fall in profits after setting aside litigation expenses of €1.5bn in the first quarter of this year. Its litigation reserves were €4.8bn at the end of last year’s quarter.

On the latest results, Barclays’ group chief executive Antony Jenkins said: ‘Resolving legacy conduct issues is also an important part of our plan to transform Barclays. We are working hard to expedite their settlement and have taken further provisions of £800m this quarter, primarily relating to Foreign Exchange. While we still have much to do, I am pleased with how we’ve begun 2015.’

Barclays also saw a departure last month from its legal team with Nick Mirabella-Williams, senior vice president for global sourcing and supplier management, departing for the Co-operative Bank where he now serves as its head of professional services procurement. At Barclays, Mirabella-Williams jointly founded the Barclays Commercial Management Programme – a collaboration initiative between the bank’s sourcing and legal functions and was responsible for spend management, developing savings initiatives and risk and governance frameworks.