Barclays (BCS) grew too quickly, paid bankers too much, and failed to cultivate a cohesive culture in recent years, according to a massive independent review published by the bank today.
Attention executives: This is how you do a mea culpa.
The 236-page report was commissioned by the bank’s top management in the heat of the Libor-fixing scandal last summer, shortly after Barclays’ then-chief executive, Robert Diamond, resigned. Compiled by investment banking attorney Anthony Salz, it takes the British bank to task for “a drift in standards” and a “drive to win” that alienated customers, inflated pay packages beyond justifiable levels, and fostered a dangerous level of risk.
It reads:
Despite some attempts to establish group-wide values, the culture that emerged tended to favor transactions over relationships, the short term over sustainability, and financial over other business purposes.
…Pay contributed significantly to a sense among a few that they were somehow unaffected by the ordinary rules.
The review also notes that surviving the crisis, in some ways, exacerbated the bank’s troubled culture. Namely, the opportunity to buy the U.S. branch of Lehman Brothers during the financial maelstrom of 2008, while attractive, saddled the bank with a major integration challenge.
Barclays Chairman David Walker said in a statement that 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,” he said.
Salz told Bloomberg that he was not asked to place blame on particular individuals.
While scathing, the findings aren’t surprising. Given the report’s focus on the go-go period from 2002 to 2008, “Barclays” could for the name of almost any big investment bank in most sections of the report. And it makes a series of recommendations that have become mantras since the dark days of the crisis:
- compensation shouldn’t be tied to revenue or short-term goals;
- customers should come first, not performance goals;
- executives and directors should pay more attention to risk.
Barclays is moving quickly to vanquish its demons. It has paid $428 million to settle charges of rate manipulation. And current CEO Antony Jenkins has been aggressive and vocal about new measures to rein in risk and cultivate a more conservative culture. As Exhibit A, Salz’s scathing report is plastered across the front of the Barclays website today.
