Barclays bankers tried to ‘win at all costs’, independent review concludes

Barclays bankers were engulfed in a culture of “edginess” and had a “winning at all costs” attitude which raised tensions with regulators and damaged its reputation, according to a review into the ethics of the embattled bank.

In a 244-page report (pdf), which cost £17m and was compiled after interviews with 600 individuals in the wake of the Libor-rigging scandal, City lawyer-turned-banker Anthony Salz calls on Barclays to strengthen its board, co-operate more closely with City watchdogs and link its pay to the bank’s “long-term success”.

Salz, who makes 34 recommendations, provides an insight into the pay of a cabal of the top 70 Barclays executives who received up to 35% more than peers at rivals, while 60 investment bankers benefited from a lucrative long-term bonus scheme that paid out £170m a year between 2002 and 2009, reports The Guardian.

“Based on our interviews, we could not avoid concluding that pay contributed significantly to a sense among a few that they were somehow unaffected by the rules,” the report says. “A few investment bankers seemed to lose a sense of proportion and humility.”

The review says the bank underestimated the reputational hit it took from its tax schemes. Data shows its controversial structured capital markets (SCM) arm made £1bn of revenue a year between 2007 and 2010. The division, which is being shut down with its 100 staff being redeployed around the bank, generated revenues of £9.5m in the 11 years to 2011.

The review also reveals that Barclays paid just £82m in corporation tax to the exchequer in 2012 after top-line profits of £7bn shrank to £246m.

Salz found the most deep-rooted culture was inside the investment bank, which was focused on success. “Winning at all costs comes at a price: collateral issues of rivalry, arrogance, selfishness and a lack of humility and generosity,” he writes.

The report – which puts a focus on the management of former chief executive John Varley – reveals that 728 Barclays bankers received more than £1m in 2010. That number fell to 428 in 2012.

The review, which does not attempt to blame any individuals for the damaging collapse in the bank’s reputation, highlights the 10 years of rapid growth that took place as Barclays rose to become a top-five global bank under Varley.

Varley, who handed the top job to Bob Diamond in January 2011, had an executive committee of six colleagues which did “not develop a cohesive team at the top”, putting Diamond in charge of the investment bank and Frits Seegers – who left in 2009 – in charge of the retail bank where he instilled a “culture of fear”.

Diamond, who quit in July 2012 just days after the bank was fined £290m for rigging Libor, had taken steps to develop one culture across the bank, says Salz, who is a director of the Scott Trust, owner of the Guardian. Rothschild, where Salz is also a director, received £1.5m in fees for his time.

Salz says: “Significant failings developed in the organisation as it grew. The absence of a common purpose or common set of values has led to conduct problems, reputational damage and a loss of public trust.”

He admitted that some Barclays staff had refused to be interviewed for the review and one City analyst described the report as an “inappropriate use of trees”, alluding to its focus on the bank’s past instead of its future challenges.

Divisions previously run by Diamond’s successor and current chief executive, Antony Jenkins, are also mentioned. Barclaycard had a culture of making money ahead of customer satisfaction. The retail bank focused on sales where loans sold with payment protection insurance generated two-and-a-half times more commission for staff than loans sold without the discredited insurance, which generated £400m in revenue a year for the bank.

Jenkins has announced a new set of values and a programme of reform, although a survey of 9,000 staff by Salz found that 70% had a high degrees of scepticism about the changes.

The review says the bank came across as “too clever by half” and that its battle to avoid a taxpayer bailout damaged its reputation. “Barclays was sometimes perceived as being within the letter of the law but not within its spirit,” the review says, describing “an institutional cleverness”.

The complicated Protium transaction it used to move loans off its balance sheet in 2009 had concerned regulators while Barclays could have communicated its 2008 fundraisings from Middle Eastern investors – now under investigation by the Serious Fraud Office – more clearly, according to the report. During crucial stress tests to assess its financial health, the bank was “insufficiently sensitive” about the way it presented the results.

Sir David Walker, appointed chairman of Barclays in the wake of the Libor fine, said: “The report makes for uncomfortable reading in parts”.