Salz Review - Wall Street Journal

31
Salz Review
An Independent Review of Barclays’ Business Practices
4.18 Frits Seegers, who had worked at Citigroup, was appointed in June 2006 to run
Barclays Global Retail and Commercial Banking (GRCB) businesses. There followed
international acquisitions by GRCB such as Expobank in Russia for £373 million and
a small bank in Indonesia. This was accompanied by rapid organic growth plans for
countries such as Pakistan and India, as well as parts of Africa, Spain and Portugal,
as part of the bank’s “stated strategy of increasing its exposure over time to emerging
markets with good growth characteristics”. 33
4.19 Building on John Varley’s Top 5 ambition, 34 Barclays had for some time hoped to
agree a merger with ABN AMRO, announcing a proposed deal in March 2007. 35
It withdrew in October that year in the face of determined competition from RBS.
2008 and the Global Financial Crisis Onwards
4.20 Following the onset of the global financial crisis, Barclays keenly avoided direct
equity investment from the UK Government believing that maintaining its
independence from Government was in the best interests of its shareholders. It also
believed that independence would enable it to take advantage of opportunities that
would arise in the crisis. With the challenges of falling asset prices and confidence,
problems of market liquidity and regulatory concern over the size of capital cushions
to cope with potential stress scenarios, retaining its independence required
considerable ingenuity and single-mindedness.
4.21 During interviews we were told that at times the executive management and Board of
Barclays felt under siege, not only from the volatile markets but also from its
stakeholders. The FSA and the Treasury naturally questioned whether Barclays could
continue to operate without Government help following the Government’s rescue of
RBS and subsequently LBG. In the markets there were questions over many banks’
asset valuations and Barclays was subject to particular scrutiny.
4.22 Barclays first raised an additional £4.5 billion of capital in July 2008 (which we
describe in more detail in Section 5). After the collapse of Lehman Brothers in
September 2008, Barclays committed to obtain additional funds from private
investors, and to sell BGI, a transaction subsequently completed with BlackRock for
$13.5 billion (£8.2 billion). At this point BGI had $1.5 trillion in assets, and the deal
generated a net gain for Barclays of $8.8 billion. More than half the proceeds were in
shares, giving Barclays 19.9% shares in BlackRock. This deal triggered the exercise of
outstanding options in the BGI employee incentive plan.
33 Barclays, “Barclays to acquire Russian bank Expobank”, press release, 3 March 2008; see:
http://group.barclays.com/about-barclays/news/press-release-item/navigation-
1329924296988?releaseID=1323.
34 See for example Barclays’ Equality and Diversity Review 2005, which refers to “our ambition of becoming a
top-five global bank”, p. 3; available from Barclays.com at
http://www.personal.barclays.co.uk/PFS/A/Content/Files/ED_review_FINAL_VERSION_OCT.pdf.
In a message to Barclays staff, John Varley said: “You’ve heard me say before that I want Barclays to be a
top five bank. I measure that not by stock market size but by capability. In other words, the test is: are we
seen by our customers and clients as one of the best (i.e. Top 5) in each of the markets or segments or
product areas in which we compete? The answer to that is yes.”
35 Barclays, “Barclays and ABN AMRO Announce Outline of Preliminary Discussions”, press release, 20
March 2007.