Barclays Fined 26 Million for Gold Fixing

Barclays Fined 26 Million for Gold Fixing.

The financial industry regulator, the Financial Conduct Authority (FCA) has today issued a fine to Barclays for £26m for traders fixing gold prices.

In very simplistic terms, this is what happened:

• Large investors (mainly from the US) had options to buy gold contracts at a particular price
• If the price did not fall to a specific point, the option was lost
• A Barclays trader then placed orders to buy Gold, keeping the price up
• This resulted in the price fix, the option being lost, and the Barclays trader saving moving and making millions in the process for Barclays (an indeed a nice bonus for the trader we assume)

The trader in question was also fined just under £100,000 and banned for life from financial services.

Comment

The ban is only UK, could this trader get another job overseas?

The fine for Barclays Group at £26m is simply to small.  Barclays profits for 2014 are likely to be in the order of £7-8bn given that first quarter profits 2014 were £1.69bn.

This fine equates in real numbers as: £26,000,000 for overall group profit of say £7,000,000,000,000 = 0.37% - or in other words around less than one day’s profit for a 200 working day year.

We really doubt this will scare any banking group into tighter controls.  We have long maintained that the FCA’s fines on large groups are simply too small to dis-incentivise them from poor practice.

Large, high impact firms, and their shareholders, will only take notice when the fines really do hit profits.