Barclays chief executive Jes Staley will step down from his role as he prepares to contest the outcome of a UK probe into historical links with convicted sex offender Jeffrey Epstein, the bank said on Monday.
Barclays said its board was made aware of the preliminary conclusions from the Financial Conduct Authority and the Prudential Regulatory Authority's investigation into Mr Staley’s links with the disgraced financier, as well as Mr Staley’s plans “to contest them”.
"In view of those conclusions, and Mr Staley's intention to contest them, the board and Mr Staley have agreed that he will step down from his role as group chief executive and as a director of Barclays," the bank said.
"It should be noted that the investigation makes no findings that Mr Staley saw, or was aware of, any of Mr Epstein's alleged crimes, which was the central question underpinning Barclays' support for Mr Staley following the arrest of Mr Epstein in the summer of 2019."
UK regulators started their investigations into links between Mr Staley and Epstein after JP Morgan provided them with emails the two exchanged when Mr Staley was the head of JP Morgan’s private bank.
The emails revealed Epstein was a key client of Mr Staley’s, with questions raised as to whether their relationship was friendly or professional. The investigation then examined whether Mr Staley had properly explained his relationship with Epstein.
Mr Staley visited the convicted paedophile while he was serving time in prison for soliciting a minor in 2009.
He later stopped by at Epstein’s private Caribbean island for a four-hour lunch a few months before taking on the leading role at Barclays in 2015.
The FCA and PRA said on Monday that they do not comment on ongoing investigations or regulatory proceedings “beyond confirming the regulatory actions as detailed in the firm’s announcement”.
Barclays first said last year that Britain's financial regulators were probing links between Mr Staley and Epstein, who killed himself while awaiting trial on sex trafficking offences.
Mr Staley has previously said his relationship with Epstein ended in late 2015, and that he regretted having any relationship with him.
Barclays said the board “is disappointed at this outcome”.
“Mr Staley has run the Barclays Group successfully since December 2015 with real commitment and skill," the bank said in a statement.
The bank's share price has fallen 9 per cent since Mr Staley became chief executive.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said the repercussions from the Epstein scandal stretch far and wide, "and now Barclays finds itself at the centre of the storm".
"It is clear the conclusions of the probe are critical. While the probe did not centre on Mr Staley’s role at Barclays but what he disclosed about his previous position at JP Morgan, what was under question was how he characterised his former relationship with the disgraced financier," Ms Streeter said.
"Although detail is limited, it appears regulators believe there was a distinct lack of transparency over this relationship. It is understood Mr Staley will contest the conclusions, and clearly the board want to distance Barclays from what could be a long drawn-out process."
C.S. Venkatakrishnan, head of global markets, will replace him as chief executive with immediate effect.
Mr Staley’s contract gives him 12 months’ notice, so he will receive his current salary of £2.4m until October next year, along with a pension allowance of £120,000 and any other benefits he is entitled to.
In a separate incident, Britain's financial regulators and Barclays fined Mr Staley a combined £1.1 million in 2018 after he tried to identify a whistleblower who sent letters criticising a Barclays employee.
The events at Barclays come as executives at the bank attend the Cop26 climate summit in Glasgow.
Ms Streeter said while other organisations focus on the environmental aspect of ESG this week under the shadow of Cop26, "this development is a reminder of how the G, as in governance, is increasingly important for companies and investors not to lose sight of".
"Sudden change at the top is always unsettling and the departure of Mr Staley, who propelled its successful investment banking expansion strategy, may be particularly unnerving for investors, with shares falling 3 per cent in early trading," she said.