Outlook: Barclays bites the Russian bullet

LIKE A receding tide, economic crisis invariably exposes some nasty surprises, some unexpectedly large wrecks lying just under the surface. Nobody would suggest Barclays falls into this category, but its provisions for Russia and the revelation of trading losses at Barclays Capital certainly come as a bit of a shock to an investment community which had been under the impression that direct British exposure to Russia was too small to be concerned about.

To those who follow the constant swings of fashion in the banking sector, it amounts to another black mark for Martin Taylor, who seems to have had more than his fair share of them over the last six months. First there was the disengagement from BZW, which he was accused of mishandling. Then came a series of slights from those he approached with proposals for consolidation. His last set of results was poorly received, and there have been persistent rumours that he is bored after five years in the hot seat and is looking for an exit. Now comes this.

If there's a lesson from Derek Wanless and NatWest about what to do when you're everyone's whipping boy, it is this: just sit tight and wait for the City's ire to move on to someone else. Mr Wanless was in a much worse position a year ago than Mr Taylor is today in terms of how he was regarded in the City, but he's been telling a good story of late and now he's everybody's favourite again.

In making these provisions, Mr Taylor is in any case recognising a reality which many of his competitors are still refusing to come to terms with. Barclays is writing off 90 per cent of all outstanding exposure to Russia; others have yet to grasp this nettle and publicly admit that there is little, if any, possibility of getting their money back. Mr Taylor has now cleared out the stables, others have yet to do so.

Quite what Barclays was doing sticking its money into Russian Geckos and other questionable high-yield debt instruments is another issue. It all goes to show that in banking you can refine your credit and risk control systems until you are blue in the face - as Mr Taylor claims to have done - but there's always some blighter who keeps working against you unnoticed. So much for arguments that in dismantling BZW, Barclays offloaded the financially dangerous bits.

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