Destabilizing speculation

Barclays CEO Jes Staley resigns as Epstein Fallout spreads


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(Bloomberg) – Barclays Plc CEO Jes Staley abruptly resigned Monday, the latest global finance titan whose exit was prompted by ties to financier and sex offender Jeffrey Epstein.

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Staley’s departure came after UK regulators shared with Barclays the preliminary findings of their multi-year investigation into what he told the bank’s board of directors about his relationship with Epstein in the wake of the arrest of the latter in 2019 for sex trafficking. Barclays commercial director CS Venkatakrishnan will replace his mentor Staley, 64, who plans to challenge the findings of the investigation.

The relationship with Epstein also helped spark the exit of one of private equity’s biggest names earlier this year when Leon Black left Apollo Global Management Inc. At Barclays, Staley’s surprise departure capped six tumultuous years at the UK lender summit. He has pushed back an earlier regulatory investigation and a campaign by an activist shareholder to overthrow him on his strategy to strengthen Barclays’ investment bank. The Epstein probe cast a shadow over Staley even as his company achieved record results.

“The board of directors is disappointed with this result,” the lender said in a statement. The regulators’ conclusions have not yet been made public.

Barclays promoted Venkat and global banking director Paul Compton last year as part of his plans to eventually replace Staley. President Nigel Higgins began looking outside the bank for possible successors in early 2020, but suspended the process to avoid destabilizing the company during the pandemic, according to people familiar with the matter. Barclays confirmed on Monday that it had reviewed external candidates but did not immediately respond to a request for further comment.

Former fund manager Epstein was found dead in his US jail cell in 2019, after being arrested and charged with sex trafficking. Epstein has spent decades cultivating ties with America’s and British elites, from Prince Andrew to Wall Street figures like Staley, Black and Glenn Dubin.

Barclays shares were down 1.2% as of 2:47 p.m. in London.

Regulator Declaration

In a joint statement, the Prudential Regulation Authority and the Financial Conduct Authority said they “do not comment on ongoing investigations or regulatory proceedings beyond confirming regulatory action as detailed in the company’s announcement. “.

Barclays said in his statement that “the investigation does not lead to a conclusion that Mr Staley saw or was aware of any of Mr Epstein’s alleged crimes”. The bank will continue to pay Staley’s £ 2.4million ($ 3.3million) salary and other benefits for next year and has said he is eligible for repatriation costs to the United States. United.

Staley, the American-born JPMorgan alumnus, spent six years restarting the investment bank built by former chief Bob Diamond – the only major UK-based securities firm to face the giants of Wall Street in Europe.

He fine-tuned the securities industry and hired a series of lieutenants from his former employer in an attempt to compete with the biggest companies on Wall Street and outshone many European rivals.

Barclays shares fell around 9% during his tenure, beating a drop of around 25% in the EURO STOXX Banks index, although the Dow Jones US Banks index rose by 81% over the course of the same period.

Venkat, one of Staley’s first recruits to JPMorgan when he took the top job, has been Barclays’ preferred candidate to take over as CEO for more than a year, according to the bank’s statement.

Veteran fund manager Richard Buxton praised the “complete continuity” that accompanies Venkat’s appointment, although he still has questions about the investigation. “The nature of the statement suggests that in the eyes of the regulator, at least, he was frugal with the truth in terms of describing his relationship,” said the chief strategy officer of Jupiter Asset Management, which is a small shareholder of Barclays. “You can’t know that without having read it.

Regulatory probe

Staley’s connection to Epstein dates back to his days as head of JPMorgan’s private bank. Epstein regularly brought him things and the couple were close professionally, a person familiar with the matter previously said.

Staley said his relationship with Epstein “started to fade when I left JPM and contact became much less frequent in 2013, 2014,” before ending in 2015, before he took his functions at Barclays.

In the summer of 2019, Staley volunteered to tell the Barclays board of directors his version of the evolution of the 15-year professional relationship with Epstein. In December of the same year, the FCA opened a formal investigation to examine this account.

“It’s clear in my mind, since 2015 when I joined Barclays – I’ve been very transparent with the bank and I’ve been very willing and open to discuss the relationship I had with him,” said Staley told Bloomberg. Television in February 2020, when the investigation was made public. At the time, the board said it had “complete confidence” in the CEO.

Barclays’ board of directors did not receive an update on the progress of the investigations once they began, according to a person familiar with the matter.

Whistleblower case

The Epstein case was not Staley’s first confrontation with British regulators. They concluded in 2018 that he repeatedly and inappropriately attempted to unmask the identity of a whistleblower who sent letters to members of the bank’s board of directors. Staley kept his job, although FCA and PRA said he had not behaved “with due skill, care and diligence.” Regulators fined him £ 642,000 and Barclays reduced his 2016 bonus to £ 500,000.

Staley spent over 30 years at JPMorgan, joining Barclays after a brief stint at the hedge fund BlueMountain Capital Management. Its focus on investment banking has been vindicated in recent quarters as the pandemic has driven activity in the capital markets.

Staley’s “sudden and unexpected departure is clearly negative,” said Edward Firth, analyst at Keefe, Bruyette & Woods. “Having said that, it is impressive that for once a major UK bank has a clear succession plan with someone who clearly has the strengths and experience to run the business successfully.”

(Adds details about Epstein’s fallout, updates share price.)

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