Deutsche Bank is the last heavyweight contender. While the other European investment banks — Barclays, UBS and Credit Suisse among them — retreat to retail and private banking amid investor discontent and a regulatory squeeze, it is doing the opposite. It wants to become more like Goldman Sachs, not less.
The New York attorney-general’s complaint against Barclays over the way it ran its dark pool seems to contain clear evidence of institutional investors being misled about the amount of “toxic liquidity” provided by high-frequency traders.
More broadly, however, it raises the question of how the original purpose of dark pools – to allow institutions to make block trades away from public markets where they would move the price – was subverted by investment banks. Read more
A speech by Lionel Barber, Financial Times editor, at Hughes Hall, University of Cambridge, May 1, 2014. An accompanying video can be viewed here.
Ladies and gentlemen, distinguished guests, I am delighted to be here tonight at Hughes Hall in the University of Cambridge. This is the prestigious City lecture, but sadly I will not be providing slides. As Lord Acton might have said, power tends to corrupt, PowerPoint corrupts absolutely.
Tonight I want to talk about bankers and banking. These days, bankers are widely viewed as greedy, self-serving, amoral or actually dangerous. Estate agents, even journalists, are held in higher regard.
This past week’s kerfuffle over bonuses and remuneration at Barclays and Royal Bank of Scotland is a reminder that bankers continue to be held responsible for the financial crisis and the economic calamities which followed.
Bankers appear to be living in a parallel universe, where the rewards are far out of kilter with what the rest of society can expect. This speaks to a deeper unease about inequality which explains the unlikely best-seller on economics, Thomas Piketty’s Capital in the Twenty-First Century.
My questions tonight are: Can bankers mend their ways and their reputations? Is there a path to rehabilitation? Read more
Managers are notorious for prioritising short-term demands when they clash with long-term goals. Research in the US has shown that most executives would shy away from a value-enhancing long-term project if it caused them to miss a quarterly earnings forecast.
How companies can manage such clashes was the subject of a “Strategy Live” debate organised by the Financial Times in London this morning. Chaired by management editor Andrew Hill, the session featured senior figures from finance and industry, who spoke on a non-attributable basis under the Chatham House rule.
Participants used the example of Barclays to launch a broader debate, examining its controversial decision to increase bonuses to its investment bankers even as it – seemingly paradoxically – tried to move to a less abrasive, more long-termist culture. Read more
Antony Jenkins’ efforts to change the culture of Barclays by cutting bankers’ pay are on hold. At its investment bank, it is paying bonuses that are 13 per cent higher to “compete in the global market for talent”. The bank’s chief executive wants to reform the pay of US and Asian investment bankers but it is beyond his contro
You’re about to hear a lot more about “good banks” and “bad banks”. The report from the parliamentary banking standards commission, due on Friday, and Stephen Hester’s departure from Royal Bank of Scotland will reignite questions such as whether RBS should be split into “good” and “bad” operations (Mr Hester opposed this).
Running in parallel is a philosophical debate about how you ensure banks are “good” – in the sense of having a strong, positive purpose.
But there is also the question of whether banks that do good are always good banks. Read more
Antony Jenkins, Barclays’ new squeaky clean chief executive, is winning good reviews today for his attempt to turn his back on the “aggressive, short-termist” regime of his predecessor, Bob Diamond.
That includes shutting down the bank’s controversial, but very profitable, tax avoidance unit. Conveniently, the announcement coincides with an example of what exactly this unit was doing.
BNY Mellon Bank has just, very expensively, lost a tax battle with the US authorities over an extremely complex swap arrangement dreamed up by Barclays. The judgement will cost the US bank about $850m. Read more
Simon Fox of Trinity Mirror, the UK newspaper and publishing group, is the latest chief executive to attempt to give a restructuring plan a sense of focus, simplicity and unity by attaching “One” to the company name. “One Trinity Mirror” – which unifies the regional and national newspaper divisions under a “flatter, more efficient management structure” – follows in the footsteps of One Ford, One Siemens, and One Anglo (at Anglo American), to name just a handful.
I prefer the “One” theme to some of the other names applied to past restructurings. Among my least favourite: “Shape 2012″ at Metro, the German retailer (“Pear-shaped 2012″ would have been more appropriate, as one observer pointed out ); Reuters’ “Fast Forward” – a scheme that predated the Thomson merger and led to mordant humour among the newly redundant about having been “fast-forwarded”; and law firm Linklaters’ “Project New World“, with its sinister Aldous Huxley overtones. Read more
There is a contradiction at the heart of legal actions piling up against large banks, including Barclays, for distorting Libor. Half the plaintiffs are complaining that the rate was kept too high; the other half that it was kept too low.
One lawsuit filed in New York by Berkshire Bank in July accuses the Libor-fixing banks of hurting lenders by artificially depressing the lending rate. As the Wall Street Journal reported:
The lawsuit effectively argues that the alleged manipulation short-changed lenders by helping borrowers pay less for mortgages and other loans.
Antony Jenkins, new chief executive of Barclays, and Rich Ricci, chief executive of corporate and investment banking, have said the right thing. Can they now do the right thing?
The rhetoric of their speeches to analysts on Monday was fine. Mr Jenkins said Barclays would “operate to the highest ethical standards. It will be balanced, less risky and more profitable”. Mr Ricci expanded on this:
We have always scrutinised our businesses based on their ability to generate returns, with careful evaluation of risk and controls embedded in that analysis. Now however, I feel it is appropriate to modify that assessment by explicitly looking at reputational risk as the first hurdle. We have to take a fresh look to see if there are products and services in which, given the changing environment, we no longer deem it appropriate to do business, regardless of financial return.
Barclays may rue having declared its involvement in the Libor lending rate scandal first, but as a consequence it has had first choice of “City grandees” to replace its chairman, Marcus Agius. The bank has managed to land the grandest of those grandees, Sir David Walker.
Author of the Walker report on governance in the financial system (probably the most downloaded document at Barclays’ HQ this week), Sir David is the squeaky-clean face of the old word-is-my-bond City of London, with experience on both sides of the regulatory fence. In 2009, he was one of five wise heads appointed by the Financial Services Authority to vet senior appointments to UK financial institutions (it might be interesting to know just how many of the current and outgoing crop of Barclays’ senior management he helped to approve). If you’re in doubt about what a grandee is, or whether you are one, take my patented multiple-choice questionnaire, published at the time. Read more
Bob Diamond arriving to give evidence to the Treasury Select Committee on interest rate fixing. Getty Images
Bob Diamond’s keenly awaited appearance before the Treasury select committee promised much and has so far (it was still going on when I broke off to write this post) offered very little for those seeking to know more about the Libor rate-fixing scandal.
But I think the former Barclays chief executive’s responses have shed light on one puzzle: how did the bank underestimate the public revulsion to the outcome of the investigation so badly? The short answer: the bank thought it would receive more credit in the court of public opinion for having helped expose the mess. Read more
Barclays has finally got the order of resignations the right way round. Bob Diamond’s departure – and the temporary restoration of Marcus Agius as chairman, a day after announcing his own exit – hands the can to the man who should have carried it in the first place.
As I wrote in my column on Monday, after Mr Agius said he would go, the resignation of the chairman didn’t mean Mr Diamond had “dodged the bullet aimed at both of them”.
Yet I still think there is worrying evidence that Barclays senior directors are in denial. In ringing the wagons against outside attack, they seem to be pursuing the line that talented individuals have been laid low by external “events” – the word used in Mr Agius’s resignations statement (now rescinded). Read more
As his job security plummets in line with Barclays’ share price, Bob Diamond is haunted by what he said in the BBC Today Business Lecture last year about culture:
Culture is difficult to define, I think it’s even more difficult to mandate – but for me the evidence of culture is how people behave when no one is watching.
But Mr Diamond didn’t suddenly wake up to the importance of a strong corporate culture after becoming chief executive of Barclays. He’s been talking about it for years and mainly with reference to his “no jerk” rule at Barclays Capital, the investment banking arm he used to run and that was home to the trading “dudes” skewered in the Libor-fixing scandal. Here he is talking about the rule in an interview with The Times last December:
If someone can’t behave with their colleagues and can’t be part of the culture, it doesn’t matter how good they are at what they do, they have to be asked to leave. You know what a jerk is when you see it. If we ever ignore the rule it always comes back to haunt us.
The Moody’s downgrade of 15 banks is a backward-looking review of the strategy that has dominated global banking for the past two decades – expanding into high-margin capital markets operations. It does not get good marks.
There was always a problem inherent in banks such as Deutsche Bank, Barclays, UBS, Bank of America, Credit Suisse and others trying to play in the investment banking world. Yet it took a very long time for a penalty to be applied.
Of course, the question is why it wasn’t applied earlier. Many of the things that Moody’s writes about in its note accompanying the downgrades were evident a long time ago – high volatility came with high margins. Read more
I wrote in my FT column about Sir Martin Sorrell of WPP, whose remuneration was rejected by 60 per cent of shareholders on Wednesday, and the fact that most CEOs demand to be paid at least as much as their rivals.
That leads to the steady ratcheting up of pay that has enraged UK investors in this year’s “shareholder spring”.
But one aspect of companies such as Barclays and WPP, home to the two highest-paid UK chief executives, is less noticed. It is that the bosses of investment banks and marketing groups tend to compare themselves not just to outsiders, but to the people within their organisations.
Investment banks such as Barclays Capital, employ traders and bankers who earn more than their CEOs, but are invisible because they are not on the board, and so their pay remains secret. Bob Diamond, Barclays’ chief executive and the former head of the investment bank, is the public target. Read more
There’s a famous scene in The Devil Wears Prada where Meryl Streep, as the terrifying editor of a Vogue-like fashion magazine, lectures dowdily dressed Anne Hathaway on the way her “lumpy blue sweater” is, in fact, distantly influenced by the catwalk collections of Oscar de la Renta and Yves St Laurent.
In the same way, are the recent votes of institutional shareholders against executive pay somehow an echo of the Occupy movement’s vocal, if ill-focused, protests, from Wall Street to the City of London?
I think they are. But it suits both sides to disagree, even if the most productive changes in the way capitalism has historically functioned might be achieved by greater engagement. Read more
In its new report, the High Pay Commission makes much of the risk that Britain will slide back to “Victorian levels of pay inequality” if runaway executive pay awards are not somehow reined in.
The parallel with the Victorian era is a resonant one. Even some of the characters in the modern-day saga are Dickensian. The avuncular Vince Cable, Britain’s business secretary and supporter of the thrust of the independent commission’s proposals, is half-Micawber, half-Cheeryble. John Varley, former chief executive of Barclays, seems a stiff-collared braces-wearing throwback to an earlier era in most respects – except one: the commission points out that top pay at his old bank is now 75 times that of the average worker, compared with a ratio of only 14.5 times in 1979. Read more
Barclays: "a Britain-and-onetime-colonies bank"
It’s common to think of Barclays and HSBC as global banks. Certainly, they’re more international than their big UK rivals, as their recent interim results demonstrate. But Pankaj Ghemawat, professor of global strategy at IESE Business School and author of World 3.0, points out that they are more geographically concentrated than most people think – and that’s a good thing. Read more