Anthony Hilton: Banker bashers will wince at tale of Barclays high life

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At the launch of The Bank that Lived a little: Barclays in the age of the very free market*, Philip Augar, the author, said while this book is about Barclays it is also about the City. Barclays may have got closer than all the others in seeking to be a global bank in the era after Big Bang in 1986, but in essence all the others wanted that too. It was just that they weren’t any good at it and lost fortunes trying to make it work. So you know who you are

Barclays did at least live a little. And Augar’s book makes a gripping read, partly by marshalling the facts, but more by interviewing the people who worked there or thereabouts. Understandably many preferred to remain anonymous but without them he could not have told the story. It helped too that he had worked in the City.

The launch also featured Bob Diamond, for a long time the CEO of Barclays Capital, and then the chief executive of the whole group, who left amid the Libor scandal. It was as well he was there — it would have been like Hamlet without the Prince of Denmark otherwise — but it was also rather odd. Clearly Augar had interviewed him several times, clearly Diamond did not  get it all his own way, but they were surprisingly friendly. Perhaps Diamond has mellowed. Perhaps Augar does not like confrontation.

Nevertheless he made some good points. He talked about Diamond’s stare, and how no one wanted to be in the room when it happened. Diamond, for his part, thought no CEO likes bad news. He was building the bank and there was no room for passengers.

That actually was the crux of it. Diamond says Barclays had great strengths in its brand and credit rating. On top of that he imposed risk management and financing, which became the bank’s competitive strengths at a time when the euro was making European capital markets viable and companies were beginning to embrace bond finance.  

He also is a hard-driving American, and Barclays was among the best of the bonus payers, albeit only once he had got rid of the majority of Barclays Capital, who he says did not know what they were doing.

Augar also says Barclays today is financially sound. So where did it go wrong?

Risk management meant more leverage — much more — and that alarmed regulators. But it was only part of it. The financial crisis got all regulators belatedly on their mettle, but Barclays took no money from government and therefore saw no reason to stop doing what it was doing. Indeed because other banks were disabled it was even more gung-ho. When the regulators made it plain that Barclays Capital had to slow down, the bank took no notice. 

When the chairman of the Financial Services Authority, Adair Turner, handed a letter of concern to the chairman of Barclays, Marcus Agius, the latter again took no notice. It was only when the Bank of England intervened that Diamond realised he had to go. The regulators had all had enough.

It has to be said that the non-executives were also poor when they could have made a difference. They were in principle big-hitters but in fact in thrall to Diamond. They did not seem to think Barclays had to toe the line and in spite of the crisis they seemed not to have made any connection with the real world either. 

But perhaps it was ever thus. Martin Taylor (the earlier ceo who gets a good press in the book) rapidly became disillusioned with his earlier generation of non-executives and decided to quit.

Diamond says he was a lightning rod for all the banks so he had to resign; he was the last one standing from the class of 2007 financial crisis, but he took it badly to start with. Augar for his part, thinks the Libor scandal, which was not of Diamond’s making, should not have forced him out. 

But is that really so? John Varley, the chief executive during the financial crisis, is facing fraud charges along with three others over the raising of share capital from Qatar. This was when the bank was determined to avoid government finance and was looking to raise it from elsewhere. Augar naturally cannot discuss this because it is sub judice, but it is unfinished business.

And of course there are other scandals with Libor and the foreign exchange market showing how wrong the culture was. And there are billions of pounds of compensation for PPI, the mis-selling of mortgage protection insurance. 

But the one which rankles to most observers is how business customers were sold interest rate risk hedging products which only protected them from rates going up. When they in fact went down, the customers were left with huge losses and many lost their businesses as a result.

It was a Barclays Capital product, and it made the bank a lot of money, although it has since paid out significant sums in compensation. Barclays has betrayed these customers and nothing will get them back. Did Diamond know; did he care, was it collateral damage or was it devil take the hindmost?

Augar’s book is good but only those in the City will like it. The rest of the country has a different take on bankers and the way in which relationships went down the tubes while the bank jacked up profits. Barclays may indeed have lived a little, but is a scandal that so many others had to pay the price.

The Bank that Lived a little: Barclays in the age of the very free market, by Philip Augar, is published by Penguin Books (£25)

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August 9, 2018 |
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