Barclays board on the rack, says ALEX BRUMMER
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Barclays sign on rack says ALEX BRUMMER: Slack members fixated on yield rather than values and UK regulators enslaved by City branch
- Barclays has been a lightning rod for regulatory shortcomings
- Successive presidents have found it impossible to stabilize the CEO role
- Can directors continue to be part of a morally reprehensible charade for long?
What is it about Barclays? It is admirable that amidst the turmoil since the financial crisis, the bank, which originated in the alleys of the city in 1690, is flying the flag. Most continental financial groups abandoned investment banking because it was too expensive and risky.
It would be extraordinary if London, as the world’s leading trading center for foreign exchange and derivatives, did not have a UK-based bank playing its part.
Barclays’ determination to compete with Wall Street players Goldman Sachs, Morgan Stanley and JP Morgan is fine, and a merit of ambition as other High Street banks have become risk averse. It has also been the downfall of Barclays.
In its pursuit of investment banking, it has been a lightning rod for regulatory shortcomings. And for various reasons, successive presidents have found it impossible to stabilize the CEO role.
Aussie American James Gorman has been CEO of Morgan Stanley since 2010. Jamie Dimon has been JP Morgan’s boss since 2005 and appears to show no signs of stepping down. At Barclays, the story is very different. John Varley was at the helm of the financial crisis. He was replaced by American Bob Diamond, who was replaced by consumer banker Antony Jenkins. He was replaced by Jes Staley (on loan from JP Morgan), relieved by CS Venkatakrishnan, who was in poor health.
Under the microscope: In its pursuit of investment banking, Barclays has been a lightning rod for regulatory shortcomings
A common factor running through the Barclays revolving door is regulatory scrapes. Varley (along with Diamond) managed to avoid a British government bailout, but needed a series of deals with Middle Eastern potentates, which were then challenged in court.
Diamond, the chief architect of today’s investment bank, was sacked by former Bank of England governor Mervyn King over involvement in the global Libor interest rate scandal.
Building on the Diamond legacy, Staley managed to fend off the threat of activist investor Ed Bramson through a strong performance.
What is now clear is that the Barclays board, led by former Rothschild & Co grandee Nigel Higgins, and to a lesser extent regulators, tried to keep Staley on board after a series of mishaps.
You understand the motive. Staley is an effective investment banker, adept at building and maintaining a trading presence. He supported Elon Musk at Tesla long before anyone suspected the electric car company would become the most valuable in the world.
His success and persuasive family behavior left a Barclays board, ultimately responsible for overseeing ethics, far too willing to take what he said for granted. No one in the UK may be unaware of the squalor surrounding Staley’s former client and friend Jeffrey Epstein.
As a result, the king’s brother Prince Andrew was cast into outer darkness and British socialite Ghislaine Maxwell ended up in an American prison.
But despite all the public noise, the Barclays board continued to support Staley’s version of his dealings with Epstein, concluding that he had been sufficiently transparent with executives.
As far as regulators are concerned, only former Bank of England governor Mark Carney was sufficiently aware of the danger Staley’s relationship with Epstein could pose to Barclays. He reportedly asked Higgins to tell Staley to consider his position. On this occasion (unlike Diamond), the governor’s intervention was not enough.
When the internet closed in on Epstein’s associates in November 2021 and a flood of new information emerged about the intimacy of sex offender Epstein and Staley’s relationship, Barclays’ boss resigned to clear his name. The latest scathing trove of emails, released as a result of a lawsuit filed by the Virgin Islands against JP Morgan, alleges exchange of pornographic images and use of Disney character names to describe Staley’s encounters as an Epstein guest . The salacious details are a huge embarrassment to other financial bigwigs who crept over Epstein.
Most critically, it shows slack members of the Barclays board of directors fixated on returns rather than values, and British regulators enslaved by the city’s establishment. If honor still exists, the chairman and non-executives at Barclays should consider whether they can bear to be a part of this morally reprehensible charade for much longer.