Hot Features
Premium
Level up your trading with our powerful tools and real-time insights all in one place.
In most cases where fraud and regulatory non-compliance are revealed, the press reports the story, politicians point their fingers, and the populace gets in a tizzy. Someone loses their job, fines may be paid, the politicians are happy, and the public sleeps at night again thinking that everything is fixed. With a little patience the scandal goes quietly into that dark night known as the past.
Apparently it isn’t going to work that way for Barclays (LSE:BARC). Another layer of the onion was peeled back today with the resignation of Andrew Tinney, COO of the Barclays Wealth division (BWA). The story can get quite involved, so we will try to keep it simple.
In February 2012 Tinney commissioned an internal investigation by Genesis Ventures in the Wealth division following US Securities & Exchange Commission expressed concerns about perceived irregularities at the bank. On or about 31 March 2012, the result of the investigation were delivered to Mr. Tinney’s home. Apparently unhappy with the contents of the report, he chose a feeble attempt to deny reality by shredding the document. On 25 September an anonymous tipster warns Barclays chairman to a secret report that reveals a “corrupt culture” at the Wealth division. It takes Barclays until 6 December before it obtains electronic copies of the report. When questioned about the report, Tinney claims that it was not a report at all. Doubting his testimony, the bank put Tinney on indefinite paid leave. Earlier this month the investigation results were delivered to Barclays. The FSA now has a copy.
Here is what it has taken 11 months to uncover:
- A maverick culture that included bullying of employees
- A business division out of control
- A strategy of “revenue at all costs“
- A culture of fear
- “The attitude and ethics of the big guys up top more than filtered to the bottom.”
- The management team are quick to make scapegoats. In other words, they fail to deal with the root problem. They don’t ask what or how, they ask “Who?”
- The department is in disarray.
- The compliance team was “not strong enough to deal with the dominant fear culture.” They, too, were living within the culture of fear.
- An iron-fist rule existed in the Manhattan based part of the company
One executive said that “when we presented the risk report (another manager) said, “This is a piece of s***,” and threw the report across the room.” In a similar display of the management style at Barclays, the investigation uncovered an incident when a compliance issue was presented to a member of the Management Committee, to which the the member said, “I don’t have time for this bull****” As the final report concludes, “A conscious choice was made to ignore compliance until an issue was raised by the regulators. There has been a total lack of accountability by the senior team.” The original report described it as “a culture that is high risk and actively hostile to compliance and ruled with an iron fist to remove any intervention from those who speak up in opposition.”
When corporate management chooses to be above regulatory compliance or downright integrity, the seeds of destruction have been sown into fertile soil. There are rules for a reason. It doesn’t matter whether you like them or not. They are they to protect the public and to safeguard investments.
Barclays needs a 180% turnaround into a culture where, from top to bottom, there is a clear understanding of the “why” and the “must” of compliance. It needs to start at the top and become infused into the company at all levels.
Business Secretary Vince Cable said “This report confirms in rather graphic language what was widely believed to be the highly unethical culture in Barclays until very recently.” CEO Antony Jenkins, who replaced Bob Diamond, has made it clear that he want to make real changes. Let’s hope that he means it and that he can do it.
