THE NEED FOR ROBUST CONTROL SYSTEMS - BANKS

Recent FX settlements by commercial banks underscore the need for robust internal control systems. Moody's just issued a report indicating that the recent Barclays FX settlement with the NY State DFS which includes a $150mio fine for weak internal systems and controls is credit negative to the Baa3 rated PLC (bank rating A2/A2 stable).  Moodys points out that since then, Barclays has made progress in strengthening its culture and improving controls.

The fine relates to Barclays delaying client trade execution and selectively rejecting unprofitable trades for its clients and is linked to the need to improve culture, first identified in 2013 by the Salz Review which then cited operational, conduct and reputational risks created by the growth of its wholesale bank. 

Barclays isn't the only bank facing FX linked fines which have totalled $10 billion to date.  DB has not settled yet and has a large potential exposure while HSBC also remains under investigation.

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