LONDON (Reuters) - Barclays chief executive Jes Staley’s attempts to unmask a whistleblower will be a test case for a regime put in place last year that aims to hold bank bosses to account if they fail to defend reinforced standards.

FILE PHOTO: A Barclays bank office is seen at Canary Wharf in London, Britain May 19, 2015. REUTERS/Suzanne Plunkett/File Photo

At stake is not just the image of a bank whose chief executive promised to reform its aggressive culture but also the efficacy of the fledgling Senior Managers Regime, which aims, among other things, to protect those who risk their jobs bringing wrongdoing to light.

Earlier this week, Barclays said it had reprimanded Staley and would cut his bonus after he twice attempted to identify the author of a letter that revealed “concerns of a personal nature” about an unnamed senior employee.

Britain’s Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority, which vetted Staley’s appointment as CEO, are investigating the bank and Staley to see what other penalties might be warranted.

Staley also faces scrutiny from parliament’s Treasury Select Committee, which successfully pushed for the departure of Bank of England Deputy Governor Charlotte Hogg for failing to register that her brother worked for a bank, a potential conflict of interest.

Andrew Tyrie, chairman of the committee, described Staley’s actions as presenting a “test case” that would show whether the Senior Managers Regime was “capable of providing meaningful scrutiny and accountability of financial institutions”.

“Now they (regulators) need to get on with the job,” said Tyrie, cautioning that “the Treasury Committee will examine their conclusions, and the process by which they arrive at them, very carefully”.

The regime, introduced by the Bank of England and the Financial Conduct Authority in March 2016, makes managers personally accountable for their actions in order to set what regulators have described as the right “tone at the top”.

Among other things, bosses are required to respect rules to protect whistleblowing. The penalty can be a ban from industry or a fine.

Eric Havian, a former U.S. state prosecutor and lawyer who represents whistleblowers in the United States, said he believed Barclays has not gone far enough to penalize Staley.

“I think Barclays needs to impose a much more serious sanction,” he said. “This is the kind of thing that creates a long-term corrosive atmosphere in the company and it’s a mistake for the bank not to treat this seriously.”

PARLIAMENT DEMAND

Introducing the managers’ regime was a central demand of the British parliament’s commission on banking standards, also chaired by Tyrie, in the aftermath of the 2007-09 financial crisis.

Tyrie and fellow lawmakers were dismayed by the rarity of whistleblowing in the British banking industry, especially after no-one flagged wrongdoing in the case of manipulation of the Libor interest rate benchmark, which involved mostly British banks and included Barclays.

Some lawmakers had gone so far as to suggest that Britain adopt the U.S. model of compensating whistleblowers - an idea ultimately rejected by regulators.

Martin Wheatley, the then-chief executive of the FCA, said in March 2015 that the senior manager’s regime was not about putting “heads on sticks”. But the watchdog will nonetheless face pressure from lawmakers to show that the regime works.

Barclays, which declined to comment for this report, is already battling lawsuits and criticism from politicians in the United States and Britain over its conduct before and during the 2008 financial crisis.

The U.S. Department of Justice is suing the bank and two former executives over charges of fraud in the sale of tens of billions of mortgage securities.

In Britain, the bank faces investigations by regulators into payments made to Qatari investors in the course of an emergency 2008 fundraising, and continuing questions about how much its executives knew about traders’ manipulation of the Libor interest rate.

Staley has attempted to show contrition, publicly apologizing for his actions and saying his actions were motivated by a desire to prevent what he thought was an unfair attack. He visited the staff canteen this week.

Some investors, who believe that Staley has done a good job running the bank since he became chief executive in December 2015, have publicly backed him, and the news has so far had little impact on the bank’s stock price.

“This was a failure of judgment not of principle. It was a pretty human failing and that’s why I feel the board have got it right in backing him,” said Crispin Odey, London-based founder of Odey Asset Management, which owns shares in Barclays.

Regulators may take a different view.

“The ultimate sanction would be that he is not ‘fit and proper’,” said one employment lawyer who advises banks, asking not to be named.

Euan Stirling of Standard Life Investments, which owns shares in Barclays, said other banks would do well to watch the outcome of the case.

“One of the things you have to consider, and it’s particularly pertinent with a bank: Look at the way that profitability has been destroyed over the past 10 years and it’s been by governance failures. So you ignore that at your peril.”