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TheStreet Open House

Barclays Data Breach Makes Target Look Tame

NEW YORK (TheStreet) -- Barclays (BCS) had better come clean about how it managed to lose so much intimate customer data and how it will avoid doing so again, because the Mail on Sunday's weekend report is actually quite scary.

The Mail in a report on Saturday that was updated early Monday, said "rogue City traders" had been able to purchase up to 27,000 Barclays customer data files. What makes this different from other recent corporate breaches of customer data is the level of detail included in the files.

Barclays said the data was collected from customers of its Barclays Financial Planning unit, which was closed during 2011. That unit used questionnaires to collect details on many aspects of customers' lives, including their earnings, bank account information, loans, medical information, insurance policies, passport numbers and national insurance numbers. Combined with customers' names and addresses, it would appear that people buying this information have everything from soup to nuts on these customers.

And that is sickening.

It also seems strange that so many customers, or potential customers, of Barclays Financial Planning would trust a complete stranger sufficiently that they would write down so much intimate personal information. It seems quite unnecessary for your financial planner to have your national insurance number, for example.

The Mail said an "anonymous whistleblower" had provided it with "a memory stick containing files on 2,000 of the bank's customers." That highlights questionable motivations of the whistlebower, who provided so much stolen information to the newspaper. Wouldn't, say, five rows of data have been enough for the Mail to break the story?

Here's the entire statement from Barclays on the theft of the customer data:

We are grateful to the Mail on Sunday for bringing this to our attention and we contacted the Information Commission and other regulators on Friday as soon as we were made aware.

Our initial investigations suggest this is isolated to customers linked to our Barclays Financial Planning business which we ceased operating as a service in 2011. Based on what we have seen, this appears to be data from 2008 or earlier.

We will take all necessary steps to contact and advise those customers as soon as possible so that they can also ensure the safety of their personal data.

Protecting our customers' data is a top priority and we take this issue extremely seriously. This appears to be criminal action and we will co-operate with the authorities on pursuing the perpetrator.

We would like to reassure all of our customers that we have taken every practical measure to ensure that personal and financial details remain as safe and secure as possible.

In fairness, there's not a whole lot that Barclays can say, since it didn't know about the loss of the customer data until Friday, according to a company spokesperson.

Plenty of light is being shed on the need for improved customer data security, with the recent breach of credit and debit card data by Target (TGT), and now with the even greater risk from they type of data theft that apparently happened to Barclays and its customers.  The Target affair has resulted in thousands of the stores customers receiving replacement credit cards from their banks, with new account numbers.  The retailer and the banks are helping customers on an individual basis who were charged for purchases they didn't make, and it is quite likely that all affected customers will be "made whole" in the end.

But the Barclays affair is different.  For customers whose intimate medical information has been stolen and sold, for example, the damage has been done.  There''s no way for these customers to restore their privacy.

Pre-announced Earnings

Barclays is scheduled to announce its fourth-quarter results on Tuesday, but the company on Monday said its adjusted 2013 profit before taxes was 5.2 billion pounds, and its statutory profit before tax for the year was 2.9 billion pounds.  Adjusted profit for 2013 declined 35% from 7.0 billion pounds during 2012.  Statutory profit before tax was way up from 246 million pounds during 2012.

That's all the data that was pre-announced.  Please see TheStreet's third-quarter earnings coverage for more on the company's performance and information on the company's "Transform" program, which CEO Antony Jenkins last March said would help the company improve performance and cut expenses sufficiently to raise its return on equity to over 11.5% in 2015

A Full Plate

Jenkins took over as Barclays CEO in August 2012, after the resignation the company's Chairman Marcus Agius and its CEO Bob Diamond in June 2012, after Barclays became the first bank to settle with regulators over the LIBOR investigations, agreeing in June 2012 to pay U.S. and European regulators $454 million. Soon after that settlement,  both resigned.

The LIBOR business isn't over, as Barclays in November was among a group of several large banks sued by Fannie Mae (FNMA), which is seeking to recover at least $800 million in losses tied to LIBOR manipulation, as well as punitive damages.

Barclays is also among large banks cooperating with regulators examining possible manipulation of foreign exchange trading. The company is conducting its own internal investigation and suspended six foreign exchange traders in November.

So investors have quite a bit to look forward to on Tuesday, as Barclays reports the progress of the "transform" program, as well as hopefully providing some updates on the data breach and its risk from regulatory fines and litigation.

American depositary receipts of Barclays during the first few minutes of trading on the New York Stock Exchange on Monday were up 0.5% to $18.14.

This chart shows the performance of Barclays' stock since the end of 2011:

BCS ChartBCS data by YCharts

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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