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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  • rate this

    Comment number 57.

    It may well lead to the breaking up of Barclays and other banks but the real question is when will we see the first bankers, politicians and regulators in jail?

  • rate this

    Comment number 56.

    If a criminal in a suit were to "review" a bunch of criminals in suits and report his findings to another group of criminals who were in cahoots with the first group of criminals - what would be the practical outcome?

    Just saying, for example, not referencing anyone...

  • rate this

    Comment number 55.

    Tripartite regulation failed..

    Much like hospital patients who die from thirst...everyone thinks its someone elses job..

    I can`t see how retail and investment banking can be run and properly managed with ring fences..moreover with a single code of conduct...

    We`re talking roundheads and cavaliers..both need different leadership..

  • Comment number 54.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 53.

    Agree. Other banks' LIBOR fixes need thorough checking. Every form of trade in the financial sector must be checked thoroughly that no abuses are going on.

    There is a deathly silence from BBA, IFS & ICAEW. I hope it means they are working really hard on this.

    Everyones' pension goes down the tubes with Barclays, etc!

  • rate this

    Comment number 52.

    @41 Sutara

    Robert Schiller , Warren Buffett and others have highlighted examples of extrovert driven Wall Street 'Masters of the Universe'.

    However, you have identified the key issue,namely 'managing and directing the systems....' . In this regard those at the top of our major financial institutions have singularly failed either through ignorance or arrogance, or a mixture of both.

  • Comment number 51.

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

  • rate this

    Comment number 50.

    15 Minutes ago
    Basic retail banking, the systems that provide electronic transfers of cash and all cash machines in the UK should be in the control of the government.


    Government track record on IT systems makes me shudder at that.

  • rate this

    Comment number 49.

    Wrong answer, I would have thought. Don't you have to go after the regulators & those who supervise the regulators on our behalf?

    Now, that would be justice.

    Similarly going after the traders who fiddled trades to make their positions better but that affected LIBOR.

    Barclays in insolvency just makes accountants rich.

    Oh, talking of accountants, what about audits ... ?

  • rate this

    Comment number 48.

    @ 42. Up2snuf

    I reckon that there coud be more do-dos to hit the fan yet.

    At some point, the BoE and the FSA will get forced to address the question of what's the value of licensing a bank if whatever it does and however it behaves, it keeps its licence?

    Anyhow you asked who would it help? Might help the 'new' TSB to pick up some punters.

  • Comment number 47.

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

  • rate this

    Comment number 46.

    It's victims? Oh, sorry, 'customers'.
    'swift justice'?
    Doesn't seem to apply to the cream of the criminals, better known as Camerons chums.
    Elections now!

  • rate this

    Comment number 45.

    36. rememberdurruti

    It's not the taxes - we can't do without banks in some shape or form - ask Ulster Bank customers what it's like! - or the UK economy would come to a dead halt.

    Justice - the police and courts system - is rarely anywhere near 'swift', especially for complex and serious cases.

    Who knows what worms may come out of the woodwork once the US class cases start?

  • rate this

    Comment number 44.

    Basic retail banking, the systems that provide electronic transfers of cash and all cash machines in the UK should be in the control of the government.

    All other retail banking would then have a baseline to compete with. Of course the way things are panning out this will happen anyway… just better if it’s planned.

    Fractional reserve banking is dying.

  • rate this

    Comment number 43.

    Something needs to be done with the bonus culture...

    It drives the behaviours that have been so damaging, both to decent bankers and society..

    Misselling..fraudulent practise..high risks machismo..etc, etc..

  • rate this

    Comment number 42.

    And who does that help?

  • rate this

    Comment number 41.

    @39 tanjo.

    Completely disagree. You need varying personality types in any decent team. That way you'll have access to the right qualities when any particular quality is required.

    The issue isn't the personalities, except for filtering out certain types like psychopaths, the issue is managing and directing the systems and culture of the team / organisation you're responsible for.

  • rate this

    Comment number 40.

    Given that government does not have the courage or desire to reform the banks then it is only appropriate that the banks do so themselves.

    Dr. Johnson said the prospect of a hanging concentrates the mind and no doubt leading members of the banking establishment have been focused on the feel of a rope about one's gizzard.

    I wish Mr. salz every good fortune in his endeavours.

  • rate this

    Comment number 39.

    Psychologically speaking, Retail Banking should be predominantly staffed by Introverts[quiet, cautious types] whilst Investment banking should be staffed by Extroverts[ risk seeking, adventurous types]. To have both types within one organisation is indeed a toxic mix! No 'ring fence' will ever prevent the latter from polluting the former.

  • rate this

    Comment number 38.

    The uncomfortable truth cuts to the quick of London society.

    Banking has determined a way of getting everyone else to pay for their misdeeds as they busily get everyone else into debt.

    To rein this in would bring opprobrium upon Salz. Everybody wants, needs, requires a growing part of the action. As if it is their god given right.

    And so the juggernaut carries on on its merry way.


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