Salz Review - Wall Street Journal

Salz Review
An Independent Review of Barclays’ Business Practices
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― Performance targets and bonus arrangements for traders which encouraged
behaviours to make profits for the bank and for themselves and which may
have led some to ignore the ethical or legal issues or the reputational impact
on the bank.
6.62 The FSA also considered LIBOR rate submissions between September 2008 and
May 2009, amid concerns that they had been adjusted on the instruction of Barclays’
senior management to make the bank appear healthier at the peak of the financial
crisis. We draw no conclusions in relation to these issues, other than that there
appear to have been significant failures of communication, internally and with the
authorities, regarding the bank’s rate submissions.
6.63 We have not been able to assess whether the behaviour illustrated by the much
publicised LIBOR emails reflects a particular trading culture that could extend into
other parts of the investment bank. With current levels of scepticism, the public is
likely to suspect that the problem extends elsewhere. It will be important that
Barclays seriously addresses this possibility and fully investigates other areas where
similar issues might have occurred.
6.64 Barclays cooperated with the regulatory enquiries and was given credit by the
regulators for this. We have been told that Barclays was generally good at responding
to particular issues identified by regulators – but less good at identifying and dealing
with the wider implications of those issues. As Barclays discovered the LIBOR
problem, we believe that it could have moved more quickly to learn any wider
lessons and to review whether there were pricing or trading issues elsewhere across
the bank.
6.65 A number of banks, including Barclays, had raised concerns about the setting of
LIBOR. In the press notice relating to the FSA’s own internal audit report (in March
2013) into the LIBOR submissions issue, it noted that “the information received
should have been better managed” by the FSA and “taking the information
cumulatively the likelihood that lowballing was occurring should have been
considered”. The information included some from Barclays. 115
Looking Forward
6.66 As Barclays, on the back of the Transform Programme, works to improve its values
and culture, and the effectiveness of its systems and controls, it is quite possible that
further historic conduct issues will be discovered. This brings with it the paradox that
current improvements could uncover legacy issues which further damage Barclays’
reputation. We consider this to be an inevitable part of the change process and
Barclays should be quick to handle issues, and not be put off by the specific response
to its early settlement of the LIBOR regulatory actions.
6.67 Interest-only mortgages are an example of the present predicament that banks face
under which long-established products are subsequently reviewed and challenged for
their suitability. The FSA has stated that interest-only mortgages can still be sold
115 Source: FSA internal audit report, 5 March 2013.