Salz Review - Wall Street Journal

More documents

Recommendations

Info

69 Salz Review An Independent Review of Barclays’ Business Practices Group Chief Executive have an important role to play in building strong relationships with the regulators. They are key contacts for the most senior regulators and set the tone for the rest of the organisation. Based on input from interviewees, we believe that the Chairmen and Group Chief Executives over our Review period recognised the importance of regulation and engaged in regular dialogue with regulators, although inevitably the style of the Group Chief Executive varied and so did the nature of the regulatory discussions. Exhibit 3. FSA Principles for Businesses The Financial Services Authority has established 11 ‘Principles for Businesses’, which are included in the FSA Handbook. The principles are the following: 1. Integrity: A firm must conduct its business with integrity; 2. Skill, care and diligence: A firm must conduct its business with due skill, care and diligence; 3. Management and control: A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems; 4. Financial prudence: A firm must maintain adequate financial resources; 5. Market conduct: A firm must observe proper standards of market conduct; 6. Customers' interests: A firm must pay due regard to the interests of its customers and treat them fairly; 7. Communications with clients: A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading; 8. Conflicts of interest: A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client; 9. Customers – relationships of trust: A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment; 10. Clients' assets: A firm must arrange adequate protection for clients' assets when it is responsible for them; 11. Relations with regulators: A firm must deal with its regulators in an open and cooperative way, and must disclose to the FSA appropriately anything relating to the firm of which the FSA would reasonably expect notice. 7.7 In 2009, Barclays also established a new Regulatory Relations role, working alongside, but not reporting to, Compliance. The purpose of this role was to improve communication with regulators and strengthen relationships. It did improve the bank’s focus on the needs of the regulator, but also – unhelpfully – divided responsibilities between the new role and the Group Head of Compliance. In December 2012, Barclays created a new role of Head of Compliance, Government and Regulatory Relations reporting directly to the Group Chief Executive. 7.8 It is inevitable that most regulated firms will at times feel the need to challenge their regulator – sometimes robustly – on specific matters. However, we observed a tendency for Barclays to test the interpretation of rules and regulations rather more
Salz Review An Independent Review of Barclays’ Business Practices 70 strongly than we would have expected. Occasionally this resulted in Barclays positioning itself within the letter of the regulations but with little sensitivity for the regulators’ views as to the spirit of those regulations. Protium is an example of this. Others are (as outlined in Section 5) the modelling approaches used in calculating capital, and the significant risk transfers which Barclays, along with other banks, engaged in for the purpose of arbitraging capital rules to reduce capital requirements. These, and the broader question of meeting capital requirements, led to some intense debates with the FSA on the acceptability of calculations, assumptions and transactions. There was a lot at stake for Barclays but the relationship seems to have suffered, with less trust and mutual respect than is desirable. 7.9 In some cases, Barclays’ approach to the management of regulatory compliance processes also strained relationships with the regulators. Barclays told us that when a problem was identified, it was good at fixing that particular problem. Interviewees told us that it was less adept at addressing the underlying causes or seeing that the specific issues required a more comprehensive solution. These concerns intensified as the regulatory environment became more intrusive in response to the financial crisis and as Barclays businesses grew and became more complex. Barclays seems to have found it difficult at times to moderate its approach. 7.10 We acknowledge that regulations have become complex and challenging for banks, made more so by the political and regulatory response to the financial crisis. There is a risk that at times the resources available to large universal banks on matters that have a bearing on these complex regulatory determinations significantly outweigh the resources available to the FSA, although these have been increased in the past five years. The approach by a technically expert and well-supported Barclays team, focusing on the letter of the law when presenting or discussing specific matters may, however, have created a significant risk of mistrust on the part of the regulatory team. We believe a culture developed within Barclays, quite possibly derived originally from the investment bank, which came across to some as being ‘clever’ or what some people have termed ‘too clever by half’, even arrogant and aggressive. Barclays was viewed by some as pushing the envelope to the limits. This was a view expressed at times by financial regulators, at least in the UK. It is also true that some shareholders and public bodies shared the same perspective. Industry observation D: Open collaboration Leading UK financial institutions have a stake in the high quality and international reputation of UK regulation and in the effect of regulation on the resilience of counterparties and the system as a whole. While challenge is appropriate, such institutions have a critical role to play in supporting the effectiveness of regulation. This should include regular engagement by the Chairmen and Chief Executives of the banks with the leadership of the PRA and the FCA, as well as with other public authorities with an interest in regulation. It should include consideration of ideas to assist both regulators and the banks improve mutual understanding. One example would be for banks to recognise the value to bankers, as part of their careers, of spending time (probably for around two years to be valuable)
Page 1:
0 Salz Review An Independent Review
Page 4 and 5:
Salz Review An Independent Review o
Page 6 and 7:
Page 8 and 9:
Page 10 and 11:
Page 12 and 13:
Page 14 and 15:
Page 16 and 17:
11 Salz Review An Independent Revie
Page 18 and 19:
Page 20 and 21:
Page 22 and 23:
Page 24 and 25: 19 Salz Review An Independent Revie
Page 40 and 41: 2012 167 1993 1994 1995 1996 1997 1
Page 58 and 59: 2002 2003 2004 2005 2006 2007 2008
Page 106 and 107: 101 Salz Review An Independent Revi
Page 124 and 125:
119 Salz Review An Independent Revi
Page 126 and 127:
Page 128 and 129:
Page 130 and 131:
Page 132 and 133:
Page 134 and 135:
Page 136 and 137:
Page 138 and 139:
Page 140 and 141:
Page 142 and 143:
Page 144 and 145:
Page 146 and 147:
Page 148 and 149:
Page 150 and 151:
Page 152 and 153:
Page 154 and 155:
Page 156 and 157:
Page 158 and 159:
Page 160 and 161:
Page 162 and 163:
Page 164 and 165:
Page 166 and 167:
Page 168 and 169:
Page 170 and 171:
Page 172 and 173:
Page 174 and 175:
Page 176 and 177:
Page 178 and 179:
Page 180 and 181:
Page 182 and 183:
Page 184 and 185:
Page 186 and 187:
Page 188 and 189:
Page 190 and 191:
Page 192 and 193:
Page 194 and 195:
Page 196 and 197:
Page 198 and 199:
Page 200 and 201:
Page 202 and 203:
Page 204 and 205:
Page 206 and 207:
Page 208 and 209:
Page 210 and 211:
Page 212 and 213:
Page 214 and 215:
Page 216 and 217:
1993 1994 1995 1996 1997 1998 1999
Page 218 and 219:
1993 1994 1995 1996 1997 1998 1999
Page 220 and 221:
1993 1994 1995 1996 1997 1998 1999
Page 222 and 223:
Page 224 and 225:
Page 226 and 227:
Page 228 and 229:
Page 230 and 231:
Page 232 and 233:
Page 234 and 235:
Page 236 and 237:
Page 238 and 239:
Page 240 and 241:
Page 244:
Salz Review - April 2013
show all

Salz Review - Wall Street Journal

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?