Although there was some knee jerk selling this morning off the back of weekend sell orders on Barclays (LSE:BARC) shares, the bank’s share price seems to be holding up Monday.
For the chief executive to step down following an investigation by city regulators into dealings with disgraced (and now dead) US financier Jeffrey Epstein, it’s clear the conclusions of the probe are critical. While the probe did not centre on Staley’s role at Barclays but what he disclosed about his previous position at JP Morgan, what was under question was how he characterised his former relationship with the disgraced financier.
Although detail is limited, it appears regulators believe there was a distinct lack of transparency over this relationship. It’s understood Staley will contest the conclusions, and clearly the board want to distance Barclays from what could be a long drawn out process.
Staley resignation “unnerving for investors”
“While other organisations focus on the environmental aspect of ESG this week under the shadow of COP 26, this development is a reminder of how the G, as in governance, is increasingly important for companies and investors not to lose sight of,” observed Susannah Streeter, senior investment analyst with Hargreaves Lansdown. “Sudden change at the top is always unsettling, and the departure of Mr Staley who propelled its successful investment banking expansion strategy may be particularly unnerving for investors, with shares falling 3% in early trading.”
However, continuity will be provided to some extent by C.S. Venkatakrishnan, head of global markets, who will take over as chief executive. He is considered to be a safe pair of hands.
Venkatakrishnan landed at Barclays in 2016 where he was Chief Risk Officer before being moved up to run global markets a year ago. He is also co-president of Barclays Bank Plc and sits on the group executive committee. He is currently still based in New York. Prior to joining Barclays he was a long term employee of J.P.Morgan.
Why Staley had to go
“It appears [Staley’s] characterisation of the relationship is not exactly how the FCA and PRA see it,” says Neil Wilson, Chief Markets Analyst at Markets.com. “The board thought Staley was “sufficiently transparent” to keep his job last year – a statement at the time that already hinted a bit of a rift between CEO and board. Having seen the preliminary findings of the FCA and PRA report, either they think he wasn’t that transparent enough and/or just don’t want a mucky fight with the regulators to distract, since Staley will contest the findings.”
Analysts were a little surprise back in February when the line from Epstein was first drawn to Staley and he remained in place. The relationship represented a reputational risk for Barclays which had already backed Staley during the whistle blower crisis. Eight months ago the board of Barclays said they still felt Staley was being transparent enough. Now it seems they have changed their minds.