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
    0

    Comment number 117.

    Message to bank execs: build bank as big as possible, keep growing. If you manage to become big enough, you are not just too big to fail, but also too big to jail.
    To justify this lack of accountability for investment banks, all-too-familiar excuses are trotted out: We are told prosecutions are disruptive; it’s more important to fix system...

  • rate this
    0

    Comment number 116.

    Treasury Secretary Timothy Geithner: Confidence in system is so fragile. Disclosure of fraud could result in a run, just like Lehman. In other words, Geithner is saying: big bankers are “too big to jail”, because disclosing their fraud could cause bank runs. Former IMF economist Simon Johnson: Main motivation behind indulgence of criminality is FEAR of consequences of getting tough with banks.

  • rate this
    +1

    Comment number 115.

    @112prudeboy
    "Are you suggesting that as we all fail we all hoist ourselves up by getting into more debt?"

    yes. its an idea I got from the banking industry.

  • rate this
    +1

    Comment number 114.

    I can draft one in five minutes - don't lie to your customers, don't lie to the regulators, don't take secret profits, and don't engage in cabals with others to fix a price for anything. Don't do anything you would be ashamed to see on the front page of the Telegraph or the Guardian

  • rate this
    0

    Comment number 113.

    Why resistance to breaking up huge investment banks? Were they not the source of economic "A" bomb (aka derivatives), rigged Libor, misselling of PPI credit insurance & other sly sales of complicated financial products such as swaps to ordinary folk?
    These investment banks appear to do everything except lend to SMEs & ordinary folk. I ask again: Who needs these investment/banking combos?

  • rate this
    -1

    Comment number 112.

    #110. gruntfuttock

    "yes. its an idea I got from the banking industry."

    But - didn't you know that the banks are too big to fail?
    See, they did their homework. No jumping into the unknown for them.

    Are you suggesting that as we all fail we all hoist ourselves up by getting into more debt?

    You would make a good banker.

  • rate this
    0

    Comment number 111.

    Review, review, REVIEW...
    How long, what for?
    Plan is to make & publish recommendations by the time of Barclays' next annual meeting in April (2013).
    Recommend, recommend, RECOMMEND...
    Delay, delay, DELAY...
    ALL TO "understand" what it was about Barclays' culture & business practices that allowed those sins to be committed.
    Use, useless, USELESS...
    Barclays was not alone.

  • rate this
    0

    Comment number 110.

    @90 prudeboy

    "So you reckon on burning bridges and hoping for the best?"

    yes. its an idea I got from the banking industry.

  • rate this
    +1

    Comment number 109.

    Break up Barclays into investment & retail - not by ring fence, which would be too much temptation for its dubious culture. I mean seperate them.
    And then, don't stop at Barclays. Break up every bank that combines retail & investment. That's what must be done to avoid speculation & nefarious products.
    Banking activities belong in a bank; gambling activities belong in a casino.

  • rate this
    +1

    Comment number 108.

    Barclays : founded by John Freame & Thomas Gould in 1690.
    The name Barclay was only used from 1736 when James Barclay
    ( a Quaker married to Freame's daughter ) became a partner.
    Lloyds Bank is named after one of its founders, Sampson Lloyd
    ( a Quaker ) who started the bank with John Taylor ( a Unitarian )
    Lloyds Bank's principles
    "we demand honesty and integrity in everything we do"

  • rate this
    0

    Comment number 107.

    #92. John_from_Hendon

    Ignoring banking will not result in the real economy flourishing.
    The banks are too entrenched.
    The EU is busy subsidising no hoper industries, led by university spin outs.
    The EU does this by encouraging central banks to subsidise local banks who then get folk into debt.

    How do we get this race to the bottom stopped?
    Internationally..

  • rate this
    0

    Comment number 106.

    As Vegraj points out, now should be the time for Barclays to look at their history for some moral guidance. But they won't find any trace of their Quaker roots on the main Barclays website. There's a bit on the BarCap site (which sounds like a social media gathering that has run out of beer). This is maybe why they are lacking Friends now.....

  • rate this
    0

    Comment number 105.

    Interesting, however my 'Branch Manager' as far as I know is a computer ! Unlike profit incentivised merchant bankers\traders who use my Managing Computers money.

  • Comment number 104.

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

  • rate this
    +2

    Comment number 103.

    96.Ewok63
    Personally, if the world is going back to the stone age,
    I would put the blame mainly on the Banking sector.
    When the GREAT EURO CRISIS eventually explodes,
    the Banks, their "great magic" of leverage, and the use
    of Debt to "create" money & wealth will be seen as
    one of the most perfect & complete disasters for mankind -
    almost as bad as a global war .

  • Comment number 102.

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

  • rate this
    +1

    Comment number 101.

    'Pasty George' is regarded as the doyen of party strategy, he did after all recommend Coulson. It is reported that he has secured untold £millions from the money launderers, insider traders, market manipulators,ponzi operatives etc that pollute the City.
    Action on the report? not a hope in hell.
    How much have Barclays contributed to his party?

  • rate this
    +1

    Comment number 100.

    Banks are too important and big to be left to themselves to reform. A supervised mixed economy is the way forward - retaining RBS in public ownership run by a diverse board including staff, users as well as appointed bankers. Statute based supervision where top management are accountable in law and major governance failures can lead to jail.

  • rate this
    +1

    Comment number 99.

    96

    Would that be the Mesolithic or Neolithic?

    Not so many people about then but good team working was essential. No television or newspapers but beautiful night skies. Can't have been that bad....

  • rate this
    +2

    Comment number 98.

    96.Ewok63
    You are wrong. There are hundreds involved
    ( directly & indirectly ) all round the world's banks
    The 14 are just the tip of iceburg.
    Most of those involved in LIBOR knew what
    was going on. Wait until the US starts its
    planned arrests - more horrors will crawl
    out of the woodwork. There has been ( & still is )
    a widespread blatent disregard for basic honesty.

 

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