The FRC said its executive counsel had concluded that there is not a realistic prospect that a tribunal would make an adverse finding against PwC in respect of the matters within the scope of the investigation.

The FRC launched its investigation under its accountancy scheme into Barclays at the end of 2014. The decision to investigate followed the FCA final notice on Barclays Bank published in September 2014.

The FCA fined Barclays £37.74m for failing to properly protect clients’ custody assets worth £16.5 bn. As a result, the FCA said the bank’s clients risked incurring extra costs, lengthy delays or losing their assets if Barclays had become insolvent.

The FCA investigation found Barclays had failed to properly apply the client asset rules when opening 95 custody accounts in 21 countries. As a result, Barclays’ records did not correctly reflect which company within its investment banking division was responsible for the assets in the accounts. Barclays also failed to set up appropriate legal arrangements with these companies.

The regulator said these failings were compounded by flaws in account naming or incorrect data that suggested assets belonged to Barclays instead of its clients.

Barclays agreed to settle at an early stage, qualifying for a 30% discount. Without this, the FCA would have imposed a penalty of almost £54m.

This was the highest fine ever imposed by the FCA or its predecessor the FSA for client assets breaches, reflecting ‘significant weaknesses’ in the systems and controls in Barclays’ investment banking division between November 2007 and January 2012 and the number of affected accounts.

Criticism

It is the second major investigation into a Big Four firm's work with banks to be dropped in a matter of weeks, after the FRC announced it would not be pursuing KPMG's audit of HBOS in September 2017, again concluding there was 'not a realistic prospect of an adverse finding'.

KPMG’s work did not fall significantly short of the standards reasonably to be expected of the audit, the test that a tribunal would apply, the regulator said.

HBOS collapsed in October 2008, when it was subject to a £50bn government bailout, having failed to foresee market conditions deteriorating and had felt it would be able to fund itself. KPMG auditors accepted the bank’s assessment and in February that year published audited statements prepared on a ‘going concern’ basis.

The FRC found the ‘evidence of market conditions at that time did not show this decision of HBOS or the auditor’s assessment of it to be unreasonable at the time’.

‘The extreme funding conditions which arose in October 2008 were not anticipated,’ it added.

Following that finding, the FRC has faced criticism from MPs and stakeholders, amid suggestions from some quarters that the regulator is too close to the profession, and it is likely this latest decision will add to those conerns.

The FCA’s final notice for Barclays is here.

Report by Pat Sweet, additional reporting by Calum Fuller