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 Article written by Robert Peston Robert Peston Economics editor

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  • rate this
    0

    Comment number 97.

    Nearly right Ewok (63.)

    If you'd just added:

    'BARCLAYS SAY THAT' 14 traders have....

  • rate this
    0

    Comment number 96.

    Barclays employees 140,000 people

    14 traders have been involved in this scandal

    that's 1 in 10,000

    If you closed down every company that had 1 bad apple in 10,000 staff, there wouldnt be any company left int he world.

    So back to the stone age then

  • rate this
    +1

    Comment number 95.

    Let's be clear here, good management of Barclays (or any other bank) would completely negate the requirement for any form of government intervention - be it ring-fencing or total separation. But we have zero faith in the banks now, and cannot afford to give them 'one more chance'.

    I like the insistense of being able to publish the report regardless of what Barclays make of it - good sign!

  • rate this
    +2

    Comment number 94.

    "or to put it in starker terms, to break up Barclays"

    One can only hope. Too big to fail is no longer an option we can afford, and not just for Barclays.

  • rate this
    +2

    Comment number 93.

    @77.
    Shipwright


    Aren't we slowly developing a new version of the Glass Steagall act. If we do I hope we don't forget in 20 to 50 years why it is there. I wonder if Ex-President Clinton still thinks it has no relevance. Bankers should learn history as well as economics. Or is it Spivery they study now?

    Agree totally, but when I see History graduates like George Osbourne I despair !!!!

  • rate this
    0

    Comment number 92.

    90.
    prudeboy

    "We need to build up the real economy.
    Then cut banking adrift."

    Just IGNORE banking!

    Regulate fro the prudential management of money via a proper price. (Jargon for sticking rates up!)

    More expensive money IS the way that the monetary economy fixes itself.

    The rick price on money is over 10% in ANY investment - only the insane regulators are holding it down!

  • rate this
    +1

    Comment number 91.

    @73.
    LowMaintenanceLifestyles


    Do we care? The man on the street is now SO disgusted by the behaviour of these people he can hardly bear to hear them mentioned any more. We've reached saturation levels of disgust Robert. We hate these people so much now that we wouldn't pee on them if they were on fire.

    Thats my fear they'll get away with it by stealth and the worn down public won't care anymore

  • rate this
    0

    Comment number 90.

    #84. gruntfuttock
    "Society is collapsing now, and will continue to collapse.
    Things are going to get a lot worse.
    Better to start now than leave it any longer."

    So you reckon on burning bridges and hoping for the best?
    I reckon that is a recipe for Syrian style disaster.
    We need to build up the real economy.
    Then cut banking adrift.

  • rate this
    +4

    Comment number 89.

    The obvious ( & urgent ) way forward for the Banks is to
    ringfence their retail activities.
    The Investment Banking side should not even be called banking,
    it should come come under the SIC code for Betting Shops .

  • rate this
    0

    Comment number 88.

    If the media were being honest they would say that Joe Public would not be averse to seeing bankers hanging upside down from lampposts all over the City of London (with their auditors and regulators).

    But is that really what we need? (OK we would enjoy it!)

    I think what we need is to see money worth something again - make money once again valuable and reinforce prudent lifestyle management.

  • rate this
    +1

    Comment number 87.

    The Banks are dinosaurs that will be extinct in
    their current form within 5 years.
    The focus of their activity is totally wrong.
    Simply put, they do not serve the public interest
    ONLY THEIR OWN.
    LINK
    http://ftalphaville.ft.com/blog/2012/07/18/1085541/the-terminal-disease-afflicting-banking/

  • Comment number 86.

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

  • rate this
    +2

    Comment number 85.

    the banks were given the chance to 'self-regulate'
    barclays did not receive government help in the banking crisis, so they arrogantly decided to continue in completely the same bonkers evil way,
    they obviously have no morals.
    they recruit people on the basis that they can lie and con plausibly.
    they should have been left to go bankrupt, the only lesson they understand.

  • rate this
    +1

    Comment number 84.

    prudeboy.
    Society is collapsing now, and will continue to collapse.
    Things are going to get a lot worse.
    Better to start now than leave it any longer.

  • rate this
    +1

    Comment number 83.

    #67.yam yzf
    "They also tend to forget that prior to GB/AD pledging that no bank will fail, the idea of TBTF did not exist."

    Ho, ho! Very amusing.

    Ever heard of Wall Street? TARP? Fannie Mae and Freddy Mac? AIG...?

    TBTF is hard-wired in our present system of banking. Suggest you read the Vickers Commission's report.

  • rate this
    +1

    Comment number 82.

    #35.Up2snuff
    "Do you really think a Savings&Loan divested from a major clearer will be any more secure? Or better behaved?"

    For 200 years or so they were both. They were called "building societies".

  • rate this
    +2

    Comment number 81.

    Seems to me these "universal" banks have never been other than a means to fleece the customer. SMBs and retail clients never wanted anything but traditional banking services; instead found their local provider had been swallowed by one or other "giant vampire squid" (or was trying to compete with same). They're designed only to extract wealth for themselves from everyone else.

    Split them up, now.

  • rate this
    -3

    Comment number 80.

    66.Zap Pow
    This is all a bit like second-guessing a court case - where you weren't in court to hear the actual evidence presented.

    In all fairness to GD/AD (and I am NO fan) they were literally hours from the RBS doors being shut, the ATMs being switched off, the web-site shut down and the phonelines turned off.

    What effect do you think that would have had on UK Plc?

  • rate this
    0

    Comment number 79.

    Any attempt to try to water down separation of the retail & investment side of Barclay's would be totally unacceptable.Anthony Salz must not submit to any overtures from them or he will loose credibility & damage his reputation in the process.
    A break up is the only solution otherwise it will only reform and revert back to its former self.
    Sometimes brutal action is necessary in this case vital.

  • rate this
    +2

    Comment number 78.

    I'm in favour of separating the retail & investment banking divisions of banks, but not sure that this is the right justification for doing so... there are plenty of businesses which would struggle to write a cohesive, relevant code of conduct for all its employees - take football clubs, for example - how do you create something relevant to star players and tea ladies? It would be quite vague...

 

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