A tale of two scandals

A little shame is a good thing

Perhaps it is a cultural thing but it is impossible not to recognize the polar opposite reactions to a couple of banking scandals that came to light recently.

Representing the West is Barclays Bank that was fined approximately $452 million by three regulators on two continents for basically attempting to rig Libor (London InterBank Offered  Rate), which serves as a benchmark for hundreds of trillions of fixed income products covering the globe. You would be hard pressed to find anyone who in some fashion is not affected by Libor.

A few days later Japan’s Nomura Holdings Inc. announced that it would punish executives based on an “internal probe into leaked information amid a government crackdown on insider trading.” The scandal involved Nomura “employees [leaking] information that third parties used for trading ahead of share sales managed by Nomura in 2010.”

In the Barclays case the alleged attempted manipulation began in 2005 and went on for at least four years. The Bank agreed to the huge fines after being given partial assurance the Department of Justice wouldn’t pursue criminal charges. The Nomura case appears to be centered on action taken in 2010 and the bank assessed punishment on its own and not part of any deal with regulators.

Barclays, in a press release, made a point to note that the fine was part of a broader investigation (i.e. everyone was doing it) and its CEO and top executives agreed to forgo 2012 bonuses, though not any pay or bonuses from the period that the misconduct—which may have improved the bank’s balance sheet and thus their compensation—occurred.  

Japanese regulators have not completed its investigation but Nomura acted proactively to cut CEO Kenichi Watanabe’s pay by half as well as cuts to other top executives. It also decided to halt business in it institutional equity sales department for five days.

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