Salz Review - Wall Street Journal

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Salz Review
An Independent Review of Barclays’ Business Practices
13. Conclusion
This independent Review was commissioned over eight months ago. Our terms of
reference were specific yet broad. Our role has been essentially to review Barclays’
business practices and to make forward looking recommendations to assist Barclays
as it seeks to rebuild trust and reputation.
As contemplated in the Terms of Reference, we have considered past events,
primarily to understand the gaps between Barclays’ behaviours and the standards
it expected. From these, we have developed the recommendations – focused on
improving Barclays’ business practices. The Terms of Reference did not ask us to
determine the truth or otherwise of allegations surrounding the events, or to pass
judgment on the shape of the business or the strategic decisions which were taken.
Inevitably readers of this Review will be tempted to focus on the evidence of past
failings. However, it is also important to put these in context. This is the story of a
proud British bank that has achieved much. Despite its turbulent recent history, it is
today a globally competitive and diverse business that has emerged from the crisis,
somewhat against the odds, as one of the world’s pre-eminent universal banks.
But this has been achieved at a cost.
Barclays responded to the changes in the City of London in the 1980s by taking
on the international banks. Early in this century, after a few false starts, it began
successfully to grow its investment bank. Aiming to be one of the global leaders,
it pushed for growth, taking advantage of seemingly endless liquidity and rising
asset prices. And the applicable Basel capital rules permitted it to add assets with
significant leverage. Investors came to expect short term success and rising returns
on equity.
For UK customers, the banks’ focus on growth was accompanied by cost
efficiencies, experienced through branch closures, a proliferation of call centres,
centralisation of credit decisions and the expansion of online banking. There was
a gradual depersonalisation of the customer experience.
The investment bank’s success was based on recruiting clever, competitive people.
Its ‘edginess’ attracted them, as did the promise of high pay, the opportunity to be
part of building something and the deeply entrenched commitment to winning.
Short-term success fed into the pay, bonuses and LTIPs of the senior executives and
those who made the money, especially in the investment bank. At a time of growth
for almost everyone, the cracks were not noticed by Barclays, by the other banks or,
to a significant extent, by the regulators. Without being aware of it, Barclays allowed
a drift in its cultures.
When the financial crisis broke, all this changed. The disproportionate sharing of risk
between employees and shareholders became apparent. Barclays continued to serve
many customers and clients well. But serious shortcomings had developed: the
absence of a common purpose or set of values; cultural inconsistencies across the