Business

Barclays sets aside £500m in currency probe

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Barclays has set aside £500m to cover potential costs from investigations into currency trading.

Barclays is among several banks being probed relating to alleged rigging of currency markets.

It also set aside an extra £170m to compensate customers wrongly sold PPI.

The bank reported a rise in pre-tax profits for the first nine months of the year to £3.72bn from £2.85bn a year earlier as costs and bad loans fell.

The Serious Fraud Office and Financial Conduct Authority are among more than dozen regulators across the world probing alleged fixing of currency markets.

Hedging products

It is alleged that traders used online chatrooms to plan the fixing of benchmark prices.

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Several investment banks, including Barclays and HSBC have already suspended currency traders due to the investigation by the FCA.

Financial Conduct Authority chief Martin Wheatley has said that currency manipulation was "every bit as bad" as the Libor scandal, where banks including Barclays, Royal Bank of Scotland and UBS paid fines totalling about $6bn relating to Libor fixing.

Barclays shares rose 2% in London to 224.90 pence.

Barclays reduced its provision for customers mis-sold interest rate hedging products by £160m, with the bank saying its review of customers sold the products was nearly completed.

The deals were mainly sold to businesses and aimed to control interest rates. As rates fell to historic lows in the wake of the financial crisis, business customers were often stuck on much higher interest rates.

The lender booked a £461m gain on assets it acquired when it bought the North American business of Lehman Brothers.

Investment bank pressure

For the three months to the end of September, most of Barclays' businesses saw profits rise except its investment bank and Africa business. Third-quarter pre-tax profit in investment banking shrank to £284m from £465m, a performance chief executive Antony Jenkins described as "disappointing."

"We see [third quarter] results as a clear indication of a deleveraging investment bank under significant pressure," said Chirantan Barua, an analyst at Bernstein Research. The £500m currency trading reserve means it "looks like" the lender is "close to settling", he said in a note to clients.

Operating costs, which includes staff wages, dropped faster than expected, said Mr Barua.

Mr Jenkins is trying to rein in pay and plans to cut 19,000 jobs by 2016, with more than 9,000 to go in the UK.

As part of a new strategy, the investment part of the bank will lose about 7,000 jobs by the end of 2016.

Barclays has faced more scrutiny from regulators in recent months.

The New York attorney general filed a fraud lawsuit against the bank in June. The lawsuit alleges the bank falsified documents and misrepresented benefits it was offering to big institutional clients, including pension funds.

It relates to the bank's "dark pool" trading operations, which allow clients to trade large blocks of shares while keeping prices private. Barclays has begun an internal probe into the allegations.

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