The Great Debate UK
Bob Diamond's promotion to chief executive of Barclays is no surprise. The driving force behind the UK bank's investment banking arm was a candidate for the top job back in 2004, and Barclays Capital's rise since then -- it contributed over 80 percent of the group's pre-tax profit in the first half of 2010 -- made him a shoo-in.
The question is what the decision means for Barclays' future structure. The UK banking commission, which reports next year, is examining whether to demand that lenders separate their retail and wholesale arms. Barclays' leaders have to consider every possible scenario.
Superficially, Diamond's promotion doesn't change things. He has promised to continue the universal banking strategy set by his predecessor, John Varley. He will return to London from BarCap's New York base, where he moved after the acquisition of the U.S. operations of Lehman Brothers. The bank's stated aspiration to limit BarCap's profit to a third of the group total has yet to be abandoned.
But putting a notoriously high-earning American investment banker in charge could change how Barclays reacts to demands for structural change. Even if the commission stops short of splitting investment banks from retail lenders, Diamond's transatlantic perspective and association with Barclays' main money-maker might make him less inclined to seek a compromise.
So much for Barclays' ambitions to be a magnet for banking talent. When the British bank hired Frits Seegers, the Dutchman arrived with a big reputation and an even larger price tag -- the cost of buying him out of his previous job at Citigroup. Three years on, he's on his way, the main casualty of a management shake-up that leaves his main rival, Barclays president Bob Diamond, looking stronger than ever.
As ever, the reorganisation is not entirely without strategic merit. Barclays is shifting responsibility for the corporate bank from the retail side of the business to its Barclays Capital investment banking arm. The logic is that even small companies want to hedge foreign exchange and commodity risks -- products they are more likely to find in Barclays Capital. Besides, most rival banks have combined corporate and investment banking. There is something in this. Though it is hard to see Barclays' investment bankers wasting much time on small British businesses with a few million pounds in turnover.