Salz Review - Wall Street Journal

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Salz Review
An Independent Review of Barclays’ Business Practices
such as insufficient funds charges and forgone interest – despite the fact that these
make up the vast bulk of banks’ revenues.” 104
6.46 In parallel to reviewing the competitiveness of the UK current account market, the
OFT brought a test case to the High Court to establish the fairness of unauthorised
overdraft charges. The lawsuit commenced in 2007, and involved seven banks and
one building society, including Barclays. While initial rulings went against the banks
(commentators described them as “potentially excessive or unfair, but not illegal”),
the Supreme Court ultimately upheld the banks’ appeal in 2009. 105
6.47 While the detail of the legal proceeding is not considered by this Review, the process
prompted the banks to consider their positions with respect to fees and charges in
the current account market. In advance of the victory in the Supreme Court, Barclays
withdrew its unauthorised overdraft offering and improved the transparency of
authorised overdraft charges.
6.48 The OFT continues to make statements on the Current Account market. As recently
as January 2013, the OFT continued to claim that banks had not made costs clearer,
and it would therefore consider whether to refer the industry to the Competition
Commission in 2015. 106
6.49 We were told that Barclays’ management believe the bank’s credit card and overdraft
charges are in line with other providers. As we have said elsewhere in the Review,
we consider that the bank should take no comfort from this. There was a significant
longstanding issue of a lack of transparency in the explanation of overdraft charges
to customers. And implicit cross-subsidies, in part caused by the continuation of
‘free-if-in-credit banking’ in the UK, made it difficult to demonstrate consistently fair
consumer outcomes.
6.50 These are examples where senior management could have taken a leadership role in
focusing on fair outcomes for customers. Failure to resolve these charging issues
quickly seems to have been a missed opportunity for all banks to show that they
prioritise treating their customers fairly where there is a conflict between customers’
interests and their own.
Del Monte Conflict of Interest
6.51 In October 2011, Barclays and Del Monte Corporation agreed to pay approximately
$90 million to shareholders to settle a lawsuit related to the 2010 sale of Del Monte
to a group of investors. Barclays paid $24 million to shareholders and Del Monte
paid $66 million. 107 Barclays denied all allegations of wrongdoing with respect to the
settlement and was not a party to the litigation. The case related to a leveraged buyout
by a consortium led by private equity investor KKR. Barclays Capital advised
Del Monte.
104 OFT, Personal Current Accounts in the UK: An OFT Market Study, 16 July 2008.
105 Tim Edmonds, Parliamentary Research Briefing, Retail Banking: Overdraft and Credit Card Charges, 1
June 2011.
106 The Times, “Banks must make costs clearer or else, OFT warns”, 26 January, 2011.
107 Chancery Court of Delaware, In re Del Monte Foods Company Shareholders Litigation, February 2011 and June
2011 filings; see also: Del Monte SEC filing 333-107830-05.