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Barclays bankers tried to 'win at all costs', independent review concludes Barclays bankers tried to 'win at all costs', independent review concludes
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Barclays bankers were engulfed in a culture of "edginess" and a "winning at all costs" attitude, according to the top lawyer appointed to lead a review into the ethics of the embattled bank. Barclays bankers were engulfed in a culture of "edginess" and had a "winning at all costs" attitude which raised tensions with regulators and damaged its reputation, according to a review into the ethics of the embattled bank.
In a 244-page report (pdf) – which cost £17m – compiled after interviews with 600 individuals in the wake of the Libor-rigging scandal, Anthony Salz calls on Barclays to strengthen its board, bolster its human resources function and link its pay to the "long-term success of the organisation". In a 244-page report (pdf), which cost £17m and was compiled after interviews with 600 individuals in the wake of the Libor-rigging scandal, City lawyer-turned-banker Anthony Salz calls on Barclays to strengthen its board, co-operate more closely with City watchdogs and link its pay to the bank's "long-term success".
Salz provides an insight into the pay of a cabal of the top 70 executives who received up to 35% more than peers at rival banks, while some 60 investment bankers benefited from a lucrative long-term bonus scheme that paid out £170m a year between 2002 and 2009.
"Based on our interviews, we could not avoid concluding that pay contributed significantly to a sense among a few that they were somehow unaffected by the rules," the report said. "A few investment bankers seemed to lose a sense of proportion and humility.""Based on our interviews, we could not avoid concluding that pay contributed significantly to a sense among a few that they were somehow unaffected by the rules," the report said. "A few investment bankers seemed to lose a sense of proportion and humility."
The strongest culture was inside the investment bank, which Salz said was focused on success. But, he noted: "Winning at all costs comes at a price; collateral issues of rivalry, arrogance, selfishness and a lack of humility and generosity". The most deep-rooted culture was inside the investment bank, which Salz said was focused on success. But, he noted: "Winning at all costs comes at a price; collateral issues of rivalry, arrogance, selfishness and a lack of humility and generosity".
The report – which for the first time criticises the management style of former chief executive John Varley – provides an insight into the pay of the top 70 executives who received up to 35% more than peers at rival banks. It reveals that in 2010 some 728 Barclays bankers received more than £1m – considerably more than 428 that the bank admitted received that sum in 2012. The report – which for the first time criticises the management style of former chief executive John Varley – reveals that in 2010 some 728 Barclays bankers received more than £1m. Following public pressure, that number has fallen to 428.
A group of 200 executives were also paid through a long-term incentive plan (Ltip) – now restricted to just a handful of top executives – which paid out lavish rewards. In the investment bank, the Ltip paid out £170m each year between 2002 and 2009 to a changing group of 60 people. The review, which does not attempt to blame any individuals for the damaging collapse in the bank's reputation, highlights the 10 years of rapid growth that took place as Barclays rose to become a top-five global bank under the stewardship of Varley. Varley, who handed the top job to Bob Diamond in January 2011, had an executive committee of six colleagues which did "not develop a cohesive team at the top", putting Diamond in charge of the investment bank and Frits Seegers – who left in 2009 – in charge of the retail bank where he instilled a "culture of fear".
Salz notes that the culture was created during 10 years of rapid growth as Barclays rose to become a top-five bank under the stewardship of Varley, who handed the top job to Bob Diamond in January 2011. Varley had an executive committee of six colleagues which did "not develop a cohesive team at the top". Diamond, who quit in July 2012 just days after the bank was fined £290m for rigging Libor, had taken steps to develop one culture across the bank, Salz said.
Diamond, who left in July 2012 just days after the bank was fined £290m for rigging Libor, attempted to develop one culture across the bank in contrast to the operation of silo-like divisions. "Significant failings developed in the organisation as it grew. The absence of a common purpose or common set of values has led to conduct problems, reputational damage and a loss of public trust," said Satz said who admitted some Barclays staff had refused to be interviewed for the review. One City analyst described the report as an "inappropriate use of trees", alluding to its focus on the bank's past instead of its future challenges.
Divisions previously run by Diamond's successor and current chief executive, Antony Jenkins, are also highlighted. Barclaycard had a culture of making money ahead of customer satisfaction while the retail bank had a focus on sales where loans sold with payment protection insurance generated two-and-a-half times more commission for staff than loans sold without the discredited insurance. Divisions previously run by Diamond's successor and current chief executive, Antony Jenkins, are also mentioned. Barclaycard had a culture of making money ahead of customer satisfaction, the report said. The retail bank had a focus on sales where loans sold with payment protection insurance generated two-and-a-half times more commission for staff than loans sold without the discredited insurance, which had generated £400m in revenue a year for the bank.
Salz found that the board should have "set the tone" of culture from the top but "with the benefit of hindsight we believe that the Barclays board did not give sufficient attentions to this area", the report found, and was not able to penetrate the structure of the bank. Jenkins has announced a new set of values and a programme of reform, dubbed transform, although a survey of 9,000 staff by Salz found that 70% had a high degrees of scepticism about the changes. Salz is a director of the Scott Trust, owner of the Guardian. Rothschild, where Salz is also a director, received £1.5m in fees for his time.
The human resources department did not "stand up" to the pay culture that developed, said Salz, who also described "an institutional cleverness" which made it difficult for shareholders to engage with the bank. In his report, Salz noted that the bank came across as "too clever by half" and that its battle to avoid a taxpayer bailout during 2008 had damaged its reputation. The complicated Protium transaction it had used to move loans off its balance sheet in 2009 had concerned regulators while Barclays could have communicated its 2008 fundraisings from Middle Eastern investors - now under investigation by the Serious Fraud Office - more clearly. During crucial "stress tests" to assess its financial health, the bank was "insufficiently sensitive" about the way it presented the results.
Barclays had an "edginess and strong desire to win", said Salz. "Barclays was sometimes perceived as being within the letter of the law but not within its spirit. "Barclays was sometimes perceived as being within the letter of the law but not within its spirit," the review said, describing "an institutional cleverness" which made it difficult for shareholders to engage with the bank.
"Significant failings developed in the organisation as it grew. The absence of a common purpose or common set of values has led to conduct problems, reputational damage and a loss of public trust." Salz made 34 recommendations, which included requiring closer co-operation with regulators and finding more board members with banking expertise. The chief executive should build a "cohesive senior executive team" and create an environment where staff felt they could escalate issues to senior management, he said.
Salz made 34 recommendations – which included requiring closer co-operation with regulators and finding more board members with banking expertise. The chief executive should build a "cohesive senior executive team" and create an environment where staff felt they could escalate issues to senior management, he said.
Sir David Walker, appointed chairman of Barclays in the wake of the Libor fine, said: "The report makes for uncomfortable reading in parts. That is bound to be the case when one asks for an independent examination of this kind, and we must learn from the findings".Sir David Walker, appointed chairman of Barclays in the wake of the Libor fine, said: "The report makes for uncomfortable reading in parts. That is bound to be the case when one asks for an independent examination of this kind, and we must learn from the findings".
Salz is a director of the Scott Trust, owner of the Guardian. Rothschild, where Salz is also a director, received £1.5m in fees for his time.
In his report, Salz noted that the bank came across as "too clever by half" and that its involvement in tax avoidance through its structured capital markets (SCM) division – which Jenkins insists is being shut down – operated in an "inherently risky business". The 100 people employed in SCM continue to work at Barclays but have been moved to other areas.