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Business & Finance Series: Expert Comment

Former senior Barclays execs charged with fraud by SFO

This is the first time criminal action has been taken against any senior bankers for events during the 2008 financial crisis.

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Four former Barclays executives charged

The former chief executive and three other senior bankers have been charged with fraud over the way Barclays raised billions of pounds from Qatar at the height of the financial crisis. The SFO has informed Barclays that it has not made a decision as to whether it will also bring charges against Barclays Bank PLC.

Andre Spicer, Professor of Organisational Behaviour at Cass Business School comments on the SFO’s decision. He said:

“The SFO action against Barclays is unique – it’s the first time a senior banker has been legally charged in the UK for wrongdoing during the financial crisis. It is the result of a changing doctrine in the world of banking regulation, which demonstrates that holding individuals to account is more effective than charging corporations.

“Some people worried that charging corporations could mean shareholders would pick up the bill, while executives escape culpability. The UK has largely avoided persecuting individuals, while the US has tended to do the opposite. In a sample of hundreds of cases of corporate wrongdoing found that in only 34% of cases individuals were charged, and in only 42% of those cases they went to jail.

It is the result of a changing doctrine in the world of banking regulation, which demonstrates that holding individuals to account is more effective than charging corporations.

Andre Spicer, Professor of Organisational Behaviour

Holding individuals to account

"There have been attempts to remedy this by holding more individuals to account, e.g. the 2015 ‘Yates memo’ by the US Deputy Attorney General Sally Q. Yates. She placed greater pressure on courts to hold individual executives to account for corporate crimes. Also, in the UK, the large scale inquiry by the Treasury Select Committee recommended individuals be held to account for wrong-doing following the financial crisis.

“The desire to hold individual executives to account for corporate wrongdoing is not new. Following a string of financial crises in the late 18th century, the Lord Chancellor Edward Thurlow pointed out that ‘corporations have neither bodies to be punished, nor souls to be condemned; they therefore do as they like’. Following the financial crisis of 2008, we have been kicking and damning bodiless and soulless corporations - and sometimes kicking and damning the odd junior banker. Now it’s the turn of senior bankers who were behind the wheel at the time.

Will senior execs think twice?

“Authorities clearly hope that pursuing prosecution against individuals will make other senior executives think twice before engaging in any financial shenanigans in the future. The threat of jail time is likely to sharpen the mind more than a big fine someone else has to pay.

“Although holding individuals to account sounds great in theory, there can be some problems in practise. Authorities tend to go easier on individuals than they do corporations when doling out punishment, because they assume a corporation should have "greater foresight than an individual.

"Blaming an individual can also mean that a corporation does not have to address systemic issues, which lead to the wrongdoing in the first place, meaning corporations can forget the lessons of the past and go on to repeat the same mistakes again.”

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