Can Barclays be salvaged?

By Felix Salmon
July 3, 2012
Vickers, and make a virtue out of necessity.

" data-share-img="" data-share="twitter,facebook,linkedin,reddit,google" data-share-count="true">

It’s easy to be rude about banks’ boards, and how they tend to be filled with tick-the-boxes types: the management consultant, the retired general, the business-school professor, and a bunch of “private investors” (or “people who inherited their money”, as they’re also known). And given its manifest incompetence over the past week, I clicked over to the list of Barclays board members fully expecting to see the same usual suspects — especially since the chairman, Marcus Agius, sounds like he really ought to have been born about 2,000 years ago.

But the fact is that the Barclays board is actually not bad, on its face. Yes, 10 of the 12 members are white men in their 50s or 60s. But if you were looking for a board which clearly understands issues in both finance and governance, I’d say that this lot was pretty good, compared to any US bank I can think of. Which makes it all the weirder how they managed to get such a spectacular amount of egg on their collective faces this week.

It was always a bit peculiar that Barclays’ chairman would resign while the CEO remained in place. “As chairman, I am the ultimate guardian of the bank’s reputation,” he said yesterday. “Accordingly, the buck stops with me and I must acknowledge responsibility by standing aside.” This of course begged the obvious question: was Bob Diamond, the CEO, somehow not a guardian of the bank’s reputation? And given that Agius’s main failures were in the way that he managed Diamond (or, more to the point, didn’t manage Diamond), how would Agius’s resignation with Diamond still in place help anything?

Today, it looks as though the board was attempting to sacrifice Agius — who had already said he was retiring next year in any case — in a doomed attempt to placate the UK’s parliament and media. Obviously, it didn’t work, and now we see an ignominious switcheroo: Diamond is out, along with COO Jerry del Missier, and Agius is back atop the board, looking for a successor.

“To state the obvious,” as Robert Peston says, “the impression has been created that this hugely important institution is not in charge of the basics of its destiny.”

Indeed, Peston reports that the decision to defenestrate Diamond was taken not by the newly-leaderless board at all, but rather by Mervyn King’s eyebrows. It’s surely right that when a board finds itself with a complete absence of testicular fortitude, top regulators have to step in to force the issue. But there’s something fishy here, too: Clive Horwood reports that at his scheduled testimony to Parliament tomorrow, Diamond was planning on blaming not himself for the Libor-fixing scandal, and certainly not Agius but rather — wait for it — the Bank of England. Which turns out to be the very institution which kicked him out, the day before he was due to testify.

The whole thing is incredibly messy and opaque, and will only serve to further damage Barclays’ reputation. Can that reputation be salvaged? I’m not sure it can: institutions the size of Barclays are hard to change, especially when a large cohort of their highest-paid employees used to work at Lehman Brothers. I very much doubt that any internal candidate could turn this ship around, and even a high-profile outsider — Bill Winters, perhaps — would find it incredibly difficult to take this peculiar beast and turn it into something comprehensible and manageable. Especially if he would be expected to raise the share price while doing so.

In the meantime, it seems that the newly-unemployed Diamond will still testify tomorrow; his departure today is unlikely to soften the blows from Britain’s parliamentarians. And given that Diamond’s resignation was clearly involuntary (Diamond pulled out of a Romney fundraiser yesterday “to focus all his attention on Barclays”), if anything he’s going to be more likely to veer off-message and start railing against those he blames for his own downfall. Who surely include Mervyn King. This is not likely to be an edifying spectacle, although it might be compelling in a car-crash kind of way.

I suspect the best bet for Barclays’ board and its new CEO, whoever that turns out to be, will be to get out in front of Vickers, and make a virtue out of necessity. Ringfence all the UK retail-banking operations and turn them into a boring utility. Then take everything else, including the whiz-bang traders and investment bankers, and list them as a separate company, most likely in the US, which can take on as much risk as its regulators allow it to. I believe the LEH ticker is still available.

6 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

If former Bank of America CEO Ken Lewis knew about secret Federal Reserve loans in 2008 and 2009, how did he not recieve BAC without knowing inside information?

http://hartzman.blogspot.com/2012/06/if- former-bank-of-america-ceo-ken-lewis.htm l

If former New York Fed Chairman and Goldman Sach’s alumni Stephen Friedman knew about secret loans to Goldman in 2008 and 2009, how did he not buy GS with unknown information?

http://hartzman.blogspot.com/2012/06/if- former-new-york-fed-chairman-and.html

Updated with some Warren Buffett and Goldman Sachs: “The Fed’s Secret Liquidity Lifelines”: Wachovia Corporation and Wells Fargo & Company

… />http://hartzman.blogspot.com/2012/06/f eds-secret-liquidity-lifelines.html

What are the chances of the “press” in the USA,
being controlled by those at the top,
who seem to play under a different set of rules? less

Posted by Hartzman | Report as abusive

“Indeed, Peston reports that the decision to defenestrate Diamond was taken not by the newly-leaderless board at all, but rather by Mervyn King’s eyebrows.”

- Best single sentence you have written in the past 6 months, with an entertaining embedded link no less.

Posted by stonewafer | Report as abusive

the LIBOR scam reveals british banks as unworthy of investor trust

the bank of england muddles through as usual and

the dishonesty of banks is still the can of worms that every sovereign wants to kick down the road

Posted by scythe | Report as abusive

I disagree with stonewater, I think this is the best phrase you’ve used for ages:
“…when a board finds itself with a complete absence of testicular fortitude…” Absolute classic! As good as Churchill’s “That was a terminological inexactitude”…

In the UK the picture is complicated by the fact that Prime Minister Cameron’s Conservative Party is bankrolled by bankers or banks to a very large extent, many of his MPs are on the boards of banks, and banks are one of the most common jobs taken by Conservative politicians when they retire from Parliament/lose their seat.

That’s why there’s not going to be a judicial inquiry, just one that Cameron can control. Part of that is to find some scapegoats. The public are baying for blood on this one and in the environment of xenophobia the right wing of Cameron’s Tories have successfully managed to generate over Europe, the public aren’t too keen on American foreigners running their banks – especially when said banks are tarnishing Britain’s reputation so spectacularly. Pick on an outsider, then close ranks and the old school chums can be protected so as to be free to do all this again in the future.

Oh, and when things get too hot for comfort, throw out an emotive news story about “perhaps” holding a Referendum on “some aspect” of Europe “in a future Parliament” to move people’s focus off banking and onto another hot button.

Cameron was in PR before he was Prime Minister, and it shows. Just look for the patterns and you can see what he’s doing.

Posted by FifthDecade | Report as abusive

Nobody is boycotting Barclays yet, as far as I know. Yet in the 1970′s, rather a lot of people boycotted them over their links to the apartheid regime in South Africa. They recovered from that – apparently so well that op-ed writers like Mr Salmon are unaware that it even happened, even if everyone in the population at large remembers it. Therefore, they can recover from this.

Posted by IanKemmish | Report as abusive

“Con la entrada en vigencia del acuerdo hoy hay cerca de 18 aos de proteccin para el sector lcteo colombiano que hay que aprovechar para hacer la transformacin de la industria lctea colombiana”, agreg por otra parte el ministro.