Barclays CEO Jes Staley Steps Down as Epstein Fallout Spreads
C.S. Venkatakrishnan, who was promoted last year to run the Barclays markets division, will become the new CEO.
(Bloomberg) -- Barclays Plc Chief Executive Officer Jes Staley abruptly stepped down Monday, the latest titan of global finance whose exit was prompted by ties to financier and sex offender Jeffrey Epstein.
Staley’s departure came after U.K. regulators shared with Barclays the preliminary findings of their multi-year probe into what he told the bank’s board about his relationship with Epstein following the latter’s 2019 arrest on sex-trafficking charges. Barclays’s trading chief C.S. Venkatakrishnan will replace his mentor Staley, 64, who plans to contest the probe’s findings.
Epstein connections also helped spark the exit of one of the biggest names in private equity earlier this year when Leon Black left Apollo Global Management Inc. At Barclays, Staley’s surprise departure caps a tumultuous six years atop the British lender. He fended off a prior regulatory probe and a campaign by an activist shareholder to unseat him over his strategy to bolster Barclays’ investment bank. The Epstein probe has cast a shadow over Staley even as his firm enjoyed record results.
“The board is disappointed at this outcome,” the lender said in a statement. The regulators’ findings have not yet been made public.
Barclays promoted Venkat and global head of banking Paul Compton last year as part of its plans to eventually replace Staley. Chairman Nigel Higgins started looking outside the bank for possible successors in early 2020, but put the process on hold to avoid destabilizing the firm during the pandemic, according to people familiar with the matter. Barclays confirmed on Monday that it had reviewed external candidates but didn’t immediately respond to a request to comment further.
Former money manager Epstein was found dead in his U.S. jail cell in 2019, after being arrested and charged with sex trafficking. Epstein spent decades cultivating ties to U.S. and British elites, from Prince Andrew to Wall Street figures like Staley, Black and Glenn Dubin.
Shares in Barclays were 1.2% lower at 2:47 p.m. in London.
Regulator Statement
In a joint statement, the Prudential Regulation Authority and Financial Conduct Authority said they “do not comment on ongoing investigations or regulatory proceedings beyond confirming the regulatory actions as detailed in the firm’s announcement.”
Barclays said in its statement that “the investigation makes no findings that Mr. Staley saw, or was aware of, any of Mr. Epstein’s alleged crimes.” The bank will continue to pay Staley’s salary of 2.4 million pounds ($3.3 million) and other benefits for the next year and said he’s eligible for repatriation costs to the U.S.
Staley, the American-born JPMorgan alumnus, spent six years rebooting the investment bank built by former chief Bob Diamond -- the only major securities firm to be headquartered in Britain taking on Wall Street giants in Europe.
He fine-tuned the securities business and hired a swath of lieutenants from his former employer in a bid to compete with Wall Street’s biggest firms, and outperformed many European rivals.
Shares in Barclays have fallen about 9% during his tenure, beating a fall of about 25% in the EURO STOXX Banks index, though the Dow Jones U.S. Banks index has risen 81% in the same period.
Venkat, one of Staley’s first hires from JPMorgan when he took the top job, has been Barclays’ preferred candidate to take over as CEO for more than a year, according to the bank’s statement.
Veteran money manager Richard Buxton welcomed the “complete continuity” that comes with Venkat’s appointment, though he still has questions about the probe. “The nature of the statement suggests that in the eyes of the regulator, at least, he was economical with the truth in terms of his description of his relationship,” said the head of strategy at Jupiter Asset Management, which is a small shareholder in Barclays. “We can’t know that without having read the thing.”
Regulatory Probe
Staley’s ties with Epstein date back to his time running JPMorgan’s private bank. Epstein regularly brought him business and the pair were close professionally, a person familiar with the matter has previously said.
Staley has said his relationship with Epstein “began to taper off as I left JPM and contact became much less frequent in 2013, 2014,” before ending in 2015, before he took up his role at Barclays.
In the summer of 2019, Staley volunteered to tell Barclays’s board his version of how the 15-year professional relationship with Epstein evolved. In December of that year, the FCA opened a formal investigation to scrutinize that account.
“It’s clear in my own mind, going all the way back to 2015 when I joined Barclays -- I have been very transparent with the bank and have been very willing and open to discuss the relationship that I had with him,” Staley told Bloomberg Television in February 2020, when the probe was made public. At the time, the board said it had “full confidence” in the CEO.
The board of Barclays did not receive updates on the progress of the investigations once they began, according to a person familiar with the matter.
Whistle-blower Case
The Epstein affair wasn’t Staley’s first run-in with British regulators. They concluded in 2018 that he repeatedly and improperly attempted to unmask the identity of a whistle-blower who had sent letters to members of the bank’s board. Staley kept his job, though the FCA and PRA said he failed to behave “with due skill, care and diligence.” Regulators fined him 642,000 pounds and Barclays reduced his 2016 bonus by 500,000 pounds.
Staley spent more than 30 years at JPMorgan, joining Barclays after a brief stretch at hedge fund BlueMountain Capital Management. His focus on the investment bank was vindicated in recent quarters as the pandemic drove capital markets activity.
Staley’s “abrupt and unplanned departure is clearly a negative,” said Edward Firth, an analyst at Keefe, Bruyette & Woods. “That said, it is impressive that, for once, a major U.K. bank has a clear succession plan with an individual who clearly has the strengths and experience to manage the business successfully.”
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