Salz Review - Wall Street Journal

151
Salz Review
An Independent Review of Barclays’ Business Practices
establishing accountabilities, key financial and operating metrics, and reviewing
performance of the businesses – with the businesses then fully accountable in
implementing the plans. 240
12.6 On becoming Group Chief Executive in 2011, Bob Diamond launched his ‘One
Barclays’ programme, which set out to consolidate more activity in the Group Centre
– initially around HR and Treasury – to increase efficiency and to forge more of an
overall group identity.
12.7 Before Bob Diamond started to reverse the policy of decentralisation, the autonomy
given to business units was most apparent in the investment bank, BGI and
Barclaycard. These businesses had their own executive committees and, to a large
extent, their own control functions. In particular, Barclays Capital (and before it was
sold, BGI even more so) was quite separate from the rest of the Group. It had its
own name, branding and premises, as well as many of its own systems and processes
– including its own general ledger, front and middle office systems, approval
processes, and email and calendar system.
12.8 A decentralised operating model has some advantages: increased accountability of
business leaders and faster-decision making closer to the customers. A number of
interviewees argued that, to be successful, the investment bank had to be run
separately. Otherwise it risked being slowed down by the less agile decision-making
process and more staid culture elsewhere in the bank.
12.9 We consider that a decentralised model presents additional challenges to the Group
Centre of a universal bank such as Barclays – both in ensuring that it has sufficient
understanding of the risks taken at a business unit level and in driving behaviours
based on the Group’s common values and standards. Without close day-to-day
involvement in business unit operations, the Group Centre will tend to place more
reliance on individual relationships between the Group Chief Executive and business
unit chief executives and between Group Centre function heads and their business
unit equivalents.
12.10 US regulatory plans for a holding company 241 and the UK ring-fencing requirements
of the Financial Services (Banking Reform) Bill will require Barclays to alter its
operating model. The UK’s current proposals require the ring-fenced retail subsidiary
bank to be “able to take decisions independently of other members of its group”. 242
The Parliamentary Commission on Banking Standards has recommended separate
risk management and governance for the ring-fenced bank. 243 Barclays will need to
give careful consideration to the mechanisms required to ensure that subsidiary
240 Internal Barclays documents relating to the 2007 restructuring project.
241 The Federal Reserve Board have proposed rules that would require foreign banking organisations with a
significant US presence to create an intermediate holding company over the US subsidiaries to help
enhance supervision and regulation of these operations; see: Board of Governors of the Federal Reserve
System, press release, 14 December, 2012; http://www.federalreserve.gov/newsevents/press/
bcreg/20121214a.htm.
242 Financial Services (Banking Reform) Bill 2012-13, p. 7;
http://www.publications.parliament.uk/pa/bills/cbill/2012-2013/0130/2013130.pdf.
243 Parliamentary Commission on Banking Standards, Second Report, 11 March 2013.