Antony Jenkins’ efforts to
change
the culture of
Barclays by
cutting bankers’ pay are on hold. At its investment bank, it is paying bonuses
that are 13 per cent higher to “compete in the global market for talent”. The
bank’s chief executive wants to reform the pay of US and Asian investment
bankers but it is beyond his control.
His problem – shared with the rest of with an industry struggling to alter
behaviour – is that there is no such thing as a banker. There are equity
brokers, foreign exchange traders, mortgage salespeople, corporate financiers
and all kinds of specialists under one roof. There is no single set of employees
unified by a professional culture and a willingness to pull together.
That spells trouble for banks such as Barclays or
Deutsche Bank as
they try to introduce “The Barclays Way” or Deutsche’s six new corporate values
(“integrity”, “innovation”, “discipline” etc). Banks banged together in a
20-year spree of mergers and leveraged risk-taking, while old skills were
replaced by computers, have little culture left from which to rebuild.
Richard Lambert, head of the UK’s
Banking Standards
Review (and a former editor of the Financial Times) is trying to fill this
vacuum with a new body that would champion good behaviour and encourage bankers
to become qualified professionals in the same way as doctors. Restraint must
come from individuals, not just banks, he believes.
I sympathise with Sir Richard, not least because he
appointed me as the FT’s banking correspondent two decades ago, when
Royal Bank of
Scotland and others were starting their trek towards self-destruction, but
he does not have much to work with. The classic “banker”, an experienced,
judicious loan expert, is a mythical figure.
The best chance, maybe the only one, lies in organisations
that are coherent enough for “culture” to have a meaning beyond bland statements
of aspiration. That was true of the old Barclays – a patrician family-run bank –
and is still true of a few banks, notably
Goldman Sachs.
Whether or not the culture is salutary, it exists.
Goldman has grown rapidly but without merging with a commercial bank or
losing its identity (its biggest deal was taking over J Aron, the commodity
broker that employed Lloyd Blankfein, its chief executive, and several other
senior partners). Its 450 partners remain a cohesive group in spite of the
strains provoked by a shift towards trading.
It was tarnished by how it behaved in the subprime mortgage crisis, and the
jury is out on its ambition to be less avaricious and nicer to its customers,
but Goldman is at least in control of itself. It cut bonuses after a fall in
revenues for 2013, limiting them to 37 per cent of income. When Mr Jenkins tried
to pull the pay lever, aiming for a similar result, it stuck.
This is hardly surprising, given how Barclays pulverised
its old culture over two decades, as it grew in investment banking. “There was
no sense of common purpose in a group that had grown and diversified ... there
were no clearly articulated and understood shared values,” according to the
Salz review of
the bank’s business practices.
Barclays is an amalgam of everything from a UK high street bank; to de Zoete
& Bevan and Wedd Durlacher, the pre-Big Bang stock broker and jobber; to
most of Lehman Brothers, the Wall Street investment bank. It would be amazing if
a branch banker in Liverpool had fellow feeling for a debt trader in
Singapore.
This does not make Barclays unusual; in fact, it is a
run-of-the-mill creation of the long boom, like RBS (National Westminster, ABN
Amro), Deutsche (Morgan Grenfell, Bankers Trust) or
JPMorgan Chase
(Bank One, Chemical Bank, Bear Stearns, Washington Mutual, Cazenove & Co
etc). All kinds of professions and cultures were thrown together.
Meanwhile, technology undermined the retail banking profession by allowing
banks to replace individual judgment with credit scoring. The branch banker was
turned into an overeager salesperson of mortgages and insurance policies, many
of which were mis-sold. UK banks have paid £20bn in redress for mis-selling of
payment protection insurance and other abuses since 2011).
One way to solve this behavioural disaster – an option favoured by Sir
Richard and others – is to encourage bankers to take professional exams and
rebuild their sense of pride and identity. Bad bankers might be struck off by
professional bodies, like bad doctors or lawyers lose licences. It was once
common for British bankers to be qualified but only a small fraction is now.
Greater professional pride would not hurt but I doubt it is the answer.
Financial analysts already study for qualifications, and that did not prevent
problems in the past. Nor is the deskilling of retail banks likely to be
reversed, creating a fresh need for traditional bankers – if anything, more work
is likely to be done by machines.
Ultimately, banks will have to strengthen their disciplines or create the
cultures they lack. The former is a lot simpler than the latter. A bank with a
coherent identity and strong leadership can tell its managers to alter course.
“We had sessions where we told everyone, ‘things that were OK then are not OK
now’,” says one banking executive.
If the bank is in effect starting from scratch, having mislaid its original
culture and instead amassed a mish-mash of financial specialists with
conflicting skills and attitudes, it is another matter. Mr Jenkins is trying
very hard to pull off what may be an impossible task.
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