Andy Rain/European Pressphoto AgencyA branch of Barclays in London.
7:43 p.m. | Updated LONDON — The push to change Barclays from a predominantly British retail bank to a global financial giant over the last two decades created a culture that put profit before customers, according to an independent report released on Wednesday.
That review, which was ordered by the bank’s top management after a rate-rigging scandal last year, highlighted an “at all costs” attitude, particularly in the company’s investment bank, that was reinforced by a bonus system that encouraged taking risks over serving clients.
“Barclays became complex to manage,” said the report, which was overseen by Anthony Salz, former head of the law firm Freshfields Bruckhaus Deringer. “The culture that emerged tended to favor transactions over relationships, the short term over sustainability and financial over other business purposes.”
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The conclusions represent a criticism of the strategy of a former chief executive of Barclays, Robert E. Diamond Jr., who helped transform the British company into one of the world’s largest investment banks.
Mr. Diamond, who stepped down last year after the scandal involving manipulation of the London interbank offered rate, or Libor, ran the bank’s investment banking operations until he became chief executive in 2011.
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Lefteris Pitarakis/Associated PressRobert E. Diamond Jr., the former chief of Barclays.
Justin Thomas/VisualMedia, via Agence France-Presse — Getty ImagesAntony P. Jenkins, chief of Barclays.
The report released on Wednesday said the push to increase profit across the bank’s operations led to potentially risky behavior that had a direct effect on the company’s reputation.
Last year, the British bank was the first global financial institution to admit wrongdoing in the rate-rigging scandal. Barclays agreed to a $450 million settlement with American and British authorities after some of its traders and senior managers were found to have manipulated the Libor.
The bank has also been implicated in the inappropriate sales of complex financial and insurance products to small businesses and retail customers that has led the British banking industry to pay billions of dollars in compensation.
The new chief executive, Antony P. Jenkins, announced a plan this year to improve the bank’s culture and profitability, including the closing of a tax planning division and the elimination of 3,700 jobs, mostly in the bank’s unprofitable European retail and business banking unit.
Mr. Jenkins also outlined efforts to end aggressive risk-taking at Barclays. In a memorandum to employees, he said staff members who were unwilling to buy into the bank’s push to rebuild its reputation should leave the bank.
Despite the move to improve how Barclays operates, it still has cultural problems, particularly related to banker bonuses, according to the independent review released on Wednesday.
“Many senior bankers seemed still to be arguing that they deserved their precrisis levels of pay,” the report said. “A few investment bankers seemed to lose a sense of proportion and humility.”
While total employee compensation at Barclays has fallen as a result of the financial crisis, pay for the bank’s top management has remained above the industry average, the report added.
In 2011, for example, compensation for the bank’s top 70 managers was 17 percent higher than that of peers at rival banks. The disparity was a result, in part, of executives moving from the investment banking unit to less well-paid jobs in other operations without an adjustment in pay to reflect their new positions, according to the independent review.
“The report makes for uncomfortable reading in parts,” the bank’s chairman, David Walker, said in a statement. “We must learn from the findings.”
Article source: http://dealbook.nytimes.com/2013/04/03/report-faults-at-all-costs-attitude-at-barclays/?partner=rss&emc=rss