Salz Review - Wall Street Journal

155
Salz Review
An Independent Review of Barclays’ Business Practices
― In the retail and commercial banks, Barclays booked provisions for alleged
PPI and SME derivatives mis-selling;
― In Wealth Management, Barclays’ fines in respect of Aviva bonds;
― Across the Group, Barclays’ fine for a failure to comply with US sanctions
and transaction reporting.
12.25 Senior management told us that they personally had a zero tolerance towards noncompliance.
However, the compliance culture did not uniformly reflect across the
Group the view that compliance was everybody’s responsibility. Many interviewees
suggested that a number of business leaders and front line staff did not view
regulatory compliance as central to their own role. Some also felt the relationship
between the business and the Compliance function was adversarial rather than
collegiate, with Compliance seen as an obstacle to overcome in doing business. These
issues have been recognised by Barclays. For example, the investment bank has
launched a programme to improve the compliance culture, including overhauling the
compliance manual and principles.
12.26 These problems may have been caused, in part, by an inconsistent implementation of
operational risk policies. In some businesses, Risk Control Assessments (RCAs),
were viewed by the businesses as a ‘box ticking’ exercise and the responsibility of the
Operational Risk function.
12.27 We also found it difficult to see how the various management committees charged
with operations and operational risk came together to oversee these risks.
In reviewing both management risk committee and Board Risk Committee
presentations, it was not clear that all operational risk losses were evaluated both
quantitatively and qualitatively against Group risk appetite and linked to subsequent
management action, for example in internal controls. We also suspect that this made
it less straightforward for the Board Risk and Audit Committees to exercise their
oversight of operational risk (see Section 9).
Reputational Risk
12.28 The management of reputational risk is complicated by the fact that reputational
damage is often the result of other risk events. Given the fallout from the financial
crisis, the low levels of trust in banks, and heightened scrutiny on business conduct,
reputational risk has become a critical issue.
12.29 Historically, Barclays articulated its approach to reputational risk as making clear that
individuals were responsible for the impact of their decisions and that certain
decisions had to be reviewed by business-specific transaction committees, which
considered the reputational impact in their assessment of a transaction. Barclays
would have benefited from a more comprehensive reputational risk framework given
its business mix. This might, for example, have led to an earlier discussion as to
whether the scale of the SCM business needed to be moderated in response to
changing public views as to the acceptability of tax structuring.