The HSBC fiasco might be a cautionary tale for Barclays

Outlook

There was a weary inevitability to Barclays’ latest financials showing another £1.8bn falling into the black hole marked “conduct”. This time it’s a mixture of yet more provisions for PPI compensation plus another lumpy sum to cover the cost of the foreign exchange trading scandal.

Without it the half-year numbers would look pretty good. With it, they’re merely respectable. The market’s enthusiasm came more from the song that executive chairman John MacFarlane is singing about the future than what the man he sacked – Antony Jenkins – had done over the previous half year.

Mr McFarlane’s melody is not a terribly new one. He’s talking cost cuts, but he does have a point. Some 70 per cent of Barclays’ income – that’s not profits, but income – is eaten up in its production.

That is a number that would horrify even American banks such as JP Morgan, which is not well known for underpaying its bankers.

But it is bureaucracy, not bankers, that worries Mr McFarlane. He says Barclays needs to cut vast swaths of it – the figure of 375 management committees is regularly quoted. So in future there will be more devolved decision making, as he preaches the virtues of decentralisation. Its a pledge, if you like, to give the people in charge of individual businesses their heads, to let them get on with it without the dead hand of those committees constantly getting in their way.

Fine ’n’ dandy. Of course, as Barclays’ near Canary Wharf neighbour (for now) HSBC found, there are risks in doing this. If you don’t keep a close eye on what your people are up to then things can go very wrong, very quickly. Which is why it has been busy re-centralising.

The comparison isn’t entirely fair. The problems at HSBC that facilitated tax avoidance on an industrial scale and made it the go-to bank for Mexican drug lords were caused by an antiquated structure that had scarcely changed since it was run by a handful of public school pals who were given a free hand because they could be relied upon to behave like stand-up fellows. Barclays’ faults appear to lie in the other direction, with the centre extending too much control under Mr Jenkins’ tenure than was necessarily healthy.

With someone like Mr McFarlane – who eats nails for breakfast – in charge it would take a brave manager indeed to risk his wrath. But Mr McFarlane won’t be in charge of Barclays forever. The search for a new chief executive is under way and regulators will get twitchy if takes too long.

To be fair, even when the strings from Barclays’ centre are loosened, the compliance function should still be there to keep a watchful eye on how the plan plays out. The lingering memory of that £1.8bn, and the successive reporting cycles wrecked by similar numbers, should ensure that it stays that way.

It wouldn’t be an issue if the industry had managed to recover the moral centre it once (more or less) possessed. But it hasn’t.