The rules have changed. You won’t feel comfortable at Barclays and, to be frank, we won’t feel comfortable with you as colleagues.” The message in this month’s letter to staff from Antony Jenkins, the bank’s new chief executive, was plain: if you don’t like our values, get out.
It is a strong start to reforming the bank’s culture but, as Barclays’ recent history shows, the problem with values statements is making them stick. For, even as some employees were fiddling the London interbank offered rate and selling customers interest rate swaps and unnecessary payment protection insurance, the bank already had an apparently robust code of conduct. “Our organisation,” read one crucial section, “was founded on traditional values of trust and honour and our success has been, and continues to be, dependent not only on the quality of our products and services, but on the way in which they are delivered. We expect every Barclays employee, and others who work on our behalf, to conduct themselves according to consistently high professional and ethical standards.”
That statement was signed by John Varley, chief executive until 2010, and reinforced by his successor. Bob Diamond said in a radio lecture in late 2011: “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.”
We did not have to wait long to know how some Barclays people were behaving. The bank’s involvement in the scandals that came to light the following year showed, as Mr Jenkins noted coyly, that: “We were not immune at Barclays from these mistakes.” Email evidence suggests senior management may have known about the “lowballing” of the Libor rate as far back as 2007.
Today, the top of the bank is wearing belt and braces. Sir David Walker, a City of London governance expert, has been appointed chairman, supported by Sir Hector Sants, former Financial Services Authority chief executive, who will oversee regulatory relationships. They will shortly receive a board-commissioned report from leading City lawyer Anthony Salz on the bank’s culture and ethics.
It is essential that they follow through. By the people they appoint, the actions they reward and those they punish, senior executives set the tone. Signals will be read and conduct accordingly amended.
There are three steps that would reinforce the message. First, training in all aspects of Barclays’ code should be compulsory for employees, no matter where they are based or in which line. Adherence should be hard-wired into employees’ terms and conditions and annual appraisals.
Second, senior managers should be required to make an annual personal, signed statement describing how this code has been implemented in their area of responsibility. For board-level post holders, this should be audited and separately verified by non-executive directors.
Third, pay practices must change. In investment banking, recent moves from short-term bonuses towards longer-term incentives and clawback provisions are the way forward. But bankers dealing with private individuals, small and medium-sized enterprises, and other less financially sophisticated customers should have further constraints. In retail banking, senior executives’ rewards should be linked to customer measures such as overall satisfaction, complaint levels, and their fair resolution and regulatory compliance. Remuneration for frontline staff should never be linked to sales.
But the problem does not start and end with Barclays. The bank was the first to settle its Libor case with regulators in the US and UK. It would help if further measures it took – ideally both radical and prompt – were introduced in conjunction with an industry-wide code of good financial practice overseen and enforced by an independent body. It is a subject on which the UK’s Parliamentary Commission on Banking Standards is likely to speak when it reports next month. The UK financial services industry, meanwhile, this week will launch a voluntary scheme to raise the quality of boardroom leadership.
This is an important moment, offering the potential for banking to begin to restore the status it lost after the “big bang” of the 1980s.