'Win at all costs' culture blamed for failings at Barclays

Salz report into bank's wrongdoings says sky-high pay distorted attitudes

James Moore
Thursday 04 April 2013 01:19

Sharp practice and over-paid bankers who had become "oblivious" to reality were yesterday blamed for the creation of a toxic "win at all costs" culture that led Barclays to dive headlong into financial scandals such as Libor interest rating fixing.

Those were the findings of the investment banker and lawyer Anthony Salz, whose 234-page report into Barclays' businesses practices was published by the bank yesterday.

In some of the more memorable passages he sharply criticised a loss of "proportion and humility" among some investment bankers in the wake of the financial crisis.

He also laid bare an interpretation of "winning" that "went beyond the simply competitive": "It was sometimes underpinned by what appeared to have been an 'at all costs' attitude." This, the report argued "comes at a price: collateral issues of rivalry, arrogance, selfishness and a lack of humility and generosity".

Mr Salz also found that the pay of Barclays' top 70 managers was "consistently and significantly above the peer group median". In 2010 their pay was 35 per cent above market benchmarks for their positions; a year later it was still 17 per cent ahead.

This, the report said, made for an unusually close-knit and stable team, but one which became hard to criticise. Staff became reluctant to "escalate" up issues of concern or deliver bad news to bosses who were "rarely effectively tested or challenged".

The report also rounded on elevated pay generally, saying it had the capacity to "distort" culture and could lead to the wrong kind of people being attracted to a bank.

It was commissioned by Barclays in the wake of the Libor interest rate fixing scandal, which led to the bank paying £290m in fines to regulators across the Atlantic last year. The bank has also had to set aside hundreds of millions of pounds to compensate people mis-sold payment protection insurance.

Mr Salz's report can be seen as an indictment of the regime of the former chief executive Bob Diamond, who built the investment bank into a global force. The report said its rapid expansion made for a lack of consistent culture and values across the organisation, with the creation of "silos" where the focus was on revenues above all else.

Mr Salz admitted that he and his team largely had to rely on the information and statements given to them by staff and managers at Barclays. However, the report, produced at a cost of £17m to the bank, notes that in some cases staff were "defensive". In part this was as a result of the criticism faced by the bank, and in part because of the unifying "us against the world" mentality fostered by the battle to remain independent of government support during the financial crisis.

Barclays' chairman, Sir David Walker, said the document made for "uncomfortable reading in parts" and said that "we must learn from the findings" . However, he said much of its recommendations were already in train as part of the Transform plan led by the chief executive, Antony Jenkins. A report will be made at the bank's annual meeting on the implementation of those parts of it that go beyond this.

However, Investec's banking analyst, Ian Gordon, described the Salz document as a "pretty turgid read".

"The primary focus of the report is procedural, while much of the commentary and accompanying recommendations seem surprisingly vague," he said.

Mr Gordon said pay levels at Barclays' investment bank have been falling, but argued that "much needs to be done" to benefit the bank's shareholders, who put their money at risk for the bank to conduct its commercial activities.

Barclays shares closed down 8.2p at 289.3p.

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