Could Barclays’ review spur break-up of bank?

 
The Barclays Bank headquarters in Canary Wharf in east London Might Barclays' retail and investment arms be separated?

Is it possible that Barclays' board has been misled by Anthony Salz's urbane manner and establishment background into thinking that his review of the bank's business practices will deliver an answer to them which is comforting and anodyne?

I have known the former Freshfields senior partner for donkey's years. And my impression has consistently been that he is tough and moral. There is a chance that he could leave Barclays in the embarrassing position of having to make difficult choices about its structure which it might wish to avoid.

It is significant, I think, that in agreeing to lead the review, Anthony Salz insisted on the right to publish his report, even if Barclays itself does not like his analysis or conclusions.

And it is interesting that, for him, the fundamental question is whether it is possible to have an effective single code of conduct for a universal bank like Barclays, when the motivations and instincts of investment banking traders and branch managers are so different.

If he were to conclude that it is pretty difficult to create a homogenous culture of putting the customer first in an organisation that contains both a giant retail bank and a giant investment bank - and my impression is that he is sceptical such a culture can be nurtured and firmly rooted - would that reinforce the case for breaking up Barclays?

As to the nitty gritty, his plan is to make and publish his recommendations by the time of Barclays' next annual meeting in April. He has been told he can interview anyone he likes, including - for example - the Barclays traders accused of trying to manipulate interest rates.

That said, he will not do an investigation of precisely who was responsible for the sins of the past, such as the attempts to rig Libor, the misselling of PPI credit insurance and the inappropriate sales of complicated financial products such as swaps to small businesses. Instead, he will endeavour to understand what it was about Barclays' culture and business practices that allowed those sins to be committed.

So, for example, he will look not only at the content of the group's existing codes of conduct, but how and whether those codes are translated into behaviour. The hope of Barclays is that a single code of conduct for the entire bank can be written and procedures put in place to make it effective.

An 'impossible dream'?

This notion of "One Barclays" is what Bob Diamond was trying to mould before the governor of the Bank of England and the chairman of the Financial Services Authority lost confidence in him, and he quit.

But what if Mr Salz determines that "One Barclays", in a cultural and ethical sense, is a naive and impossible dream?

One solution would be to augment the new financial ring fence between retail banks and investment banks, that is being forced on universal banks by the government, with a behavioural ring fence - such that expectations of the conduct of retail bankers would be different from those of investment bankers.

Or, some might argue, a cleaner solution would be to physically separate the retail bank and investment bank - or to put it in starker terms, to break up Barclays.

 
Robert Peston, economics editor Article written by Robert Peston Robert Peston Economics editor

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  • Comment number 17.

    All this user's posts have been removed.Why?

  • rate this
    +1

    Comment number 16.

    "the fundamental question is whether it is possible to have an effective single code of conduct for a universal bank like Barclays"

    Something like "Stay within the regulations and the law"? Probably not possible.

  • rate this
    +1

    Comment number 15.

    Iceland went a better way

    Must turn the dumb mantra of Too Big To Fail into the true problem

    Too Bust To Save

    Then put in place what post casino UK looks like - & given how much industrial damage successive dumb govts have done, this will require a level of talent our political class hasn't displayed for a very long time

    Outside UK CoL is now exposed as the repo charlatan it's been for years

  • rate this
    +8

    Comment number 14.

    If one really wants to reform the banks take away their power to expand and contract the money supply. As long as the later prevails a nation will always be held hostage to banking interests.

  • rate this
    -1

    Comment number 13.

    11.Zap Pow

    Sonny, Jim, our banks are GLOBAL banks!

    You must work for one of them!

    The UK economy has been run for the exclusive benefit of the global banks for decades - that is why we have no other economy! Right from Mrs T. letting the exchange rate rise to 2.4 US$ = 1£.

  • rate this
    +8

    Comment number 12.

    Who is going to investigate BoE? They have been lowballing the base rate and causing utmost damage to the pensions, savings and our future.

    Who will investigate and break them up?

  • Comment number 11.

    All this user's posts have been removed.Why?

  • rate this
    +1

    Comment number 10.

    @4
    "Every mortgage, every loan, overdraft and credit card is a risk"
    especially when the interest rate is not based upon ability to pay but, on one that has been rigged!

    "Without investment banks pensions would be far poorer"
    Mine has been reduced by 34% in 4 years due to 'investment banking'

    Nationalise them all and break up the cartel. Laws to control how they operate. Trials and prosecutions

  • rate this
    +9

    Comment number 9.

    Our predecessors paid heavy prices for forgetting retail banking & "investment" "banking" could be within one bank

    Successive UK govts have been dumb enough to bet our future on letting the City do as it sees fit

    And all it sees fit is to set up a rigged casino & then shuffle the dodgy proceeds through tax havens - heads they win etc

    Separation vital - & now

    So long & thanks for all the fish

  • rate this
    +4

    Comment number 8.

    Is it simpler just to say FSA regulated organisations can not partake in non regulated activities?

  • rate this
    +5

    Comment number 7.

    I've been banging on about the vital necessity of breaking up all of the bloated cartel of banks.

    We must force them to break themselves up of introduce laws as they did with the oil industry in the USA.

    Our banks have destroyed the country.

    The country must destroy the banks in return. It is their own fault.

    Note to civil servants find another retirement job - this means you GoD!

  • rate this
    +8

    Comment number 6.

    The idea that any of these leviathans ever put the customer first is laughable, they put the Bank first in all of their dealings period..

    We shouldn't even be talking ring fences it should have been already done with a complete split of the activities.

    How can the term " Investment " ever be used with eg share shorting or HF trading ?

    a code ? application of existing law would be a start.

  • Comment number 5.

    All this user's posts have been removed.Why?

  • rate this
    0

    Comment number 4.

    Investment dealers and branch managers don't run the bank. That happens far higher up the pyramid. People who think retail banking isn't a bit of a casino haven't thought things through. Every mortgage, every loan, overdraft and credit card is a risk.

    All this needs is regulators who understand the products they're supposed to be regulating. Without investment banks pensions would be far poorer

  • rate this
    +1

    Comment number 3.

    Why not just limit the instruments investment bankers are allowed to trade to those that are actually connected to the real world? And a Financial transaction tax of a few basis points would not really hit legitimate banking - only the high volume, speculative gambling that was going on.

  • rate this
    +5

    Comment number 2.

    "expectations of the conduct of .....investment bankers."

    Ha ha ha......

    You write some cracking lines Robert.

  • rate this
    +12

    Comment number 1.

    No, but it could lead to what is actually needed. Trials and prosecutions as stipulated in the Tory policy of 'swift justice'.
    Well Cameron?

 

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