BCS Barclays PLC

By Max Colchester 

Barclays PLC Chief Executive Jes Staley will keep his job after British regulators concluded his attempts to unmask a whistleblower didn't represent a "lack of integrity" and instead chose to slap the U.S. executive with a fine.

Last year the bank flagged to regulators Mr. Staley's attempts to reveal the identity of a whistleblower who criticized a hire he made. The move prompted a yearlong probe and fears the chief executive could be deemed unfit to run a bank. On Friday, the bank said regulators concluded that Mr. Staley didn't act "with a lack of integrity or that he lacks fitness and propriety to continue to perform his role."

Instead Mr. Staley will face a financial penalty that Barclays insiders say could hit seven figures. In a statement, U.K. regulators said they had "drafted warning notices" related to the CEO but declined to comment on the size of a fine.

Barclays said it couldn't comment on the outcome of the probe because Mr. Staley still has the right to challenge the fine. The bank added that its board continues to endorse Mr. Staley. It has previously said it would dock some of Mr. Staley's 2016 pay.

The decision to back Mr. Staley ends a year of instability for the U.S. executive and draws a line under a major unknown that has weighed on Barclays as it looks to finish a multiyear restructuring. It also clears the way for him to focus on running the bank, which is wrestling with a deeper problem: whether its investment bank can generate strong profits and allay some investors' long-held concerns that it needs to be dramatically shrunk.

The investigation into Mr. Staley has proved an awkward distraction. In the summer of 2016 Mr. Staley ordered internal investigators to find the identity of a person who criticized a hire he made. This was flagged to regulators.

Mr. Staley later apologized for his actions and the whistleblower's identity was never revealed. However, his efforts came just as British regulators were tightening protections for whistleblowers. The Financial Conduct Authority and Prudential Regulation Authority both launched investigations. Investors fretted that they would deem Mr. Staley unfit to run a major bank or make it clear to Barclays's board that he should be moved along.

The probe also came at an awkward time for British regulators. It was the first major test of the new U.K. "Senior Managers Regime," a set of rules aimed at ensuring bank executives are held responsible for their actions. Regulators are walking a tightrope to prove they are tough without destabilizing one of the U.K.'s biggest banks. As a deterrent to others, Mr. Staley is expected to face a big fine and the publication of an unflattering review of his actions.

"The magnitude of banning the sitting CEO of such a systemically important institution made outcomes other than a fine unlikely," says Nicholas Queree, a lawyer at Peter & Peters. "The case does set an interesting precedent," he adds, executives can use their power to try and unmask a whistleblower "and remain in a regulated post."

Barclays said a separate probe into the bank's whistleblowing practices hasn't resulted in enforcement but they will have to make some changes to the way it operates. Barclays has recently been ticking off a list of past misdeeds. Last month the bank paid pay $2 billion in civil penalties to resolve U.S. Justice Department claims that the U.K. lender fraudulently sold mortgage securities that helped fuel the financial crisis.

Write to Max Colchester at max.colchester@wsj.com

(END) Dow Jones Newswires

April 20, 2018 04:33 ET (08:33 GMT)

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