In my last blog, I pondered whether Andrew Jenkins could possible reform Barclays Bank. I suggested some new principles by which he might operate in future. Unhappily, I now realise I was wrong A major report published on Sunday 20th January proves the depth of moral corruption and compliance-averse conduct exercised by the Barclays Bank Wealth Division.
It describes the regime of fear which was deliberately inculcated inside Barclays Wealth. It reports how the boss, Andrew Tinney, lied and shredded evidence of a damning report in March 2011 which would expose the real state of affairs inside the Bank of bullying, and how Intimidated staff were forced to deliberately ignore and flout regulatory and compliance rules in pursuit of 'revenue at all costs'.
Such a report has issued a final death blow to what little was left of Barclays otherwise appalling feral reputation, and it means that Andrew Jennings' attempts to re-launch the bank, demonstrating a new 'ethical' profile, adhering to all the public compliance norms, is not only doomed to fail, but should be pre-empted, and the Barclays Wealth Division should be closed down as being in the public interest.
Andrew Tinney resigned after it was revealed that he covered up a report into Barclays Wealth's failings. He secretly shredded a bombshell report that described a key part of the bank as ‘out of control’.
Andrew Tinney, who was chief operating officer of the bank’s high-end private investment division, Barclays Wealth, destroyed the explosive dossier after reading its shocking contents. He then misled banking regulators and Barclays chief executive Antony Jenkins – the man brought in to clean up the bank after the Libor rate-fixing scandal and the resignation of Bob Diamond – by pretending that the report had never existed. Tinney contributed to that state of affairs by shredding the only hard copy and ensuring that its contents were not entered into the Barclays computer system.
Apart from anything else, such actions, on the part of a senior executive of the Bank are in direct contravention of Section 172 of the Companies Act 2006, and even now, I cannot understand why shareholders are not organising a litigation group action to sue this man back to the Stone Age for breach of his fiduciary duties towards them. I shall certainly watch the FSA's actions to see how they penalise Barclays for these outrageous breaches of corporate governance and their responsibilities towards their regulator.
This is what always infuriates me about our financial regulatory approach. We have perfectly good laws in the UK to regulate this kind of behaviour, but when they are breached, and it is the banks who are involved, no-one in authority does anything about invoking the legal powers to take action, instead they lie about their powers to act! We were lied to by the FSA over PPI fraud, we were lied to by the FSA over money laundering issues, we were lied to by the FSA about the relevant powers to deal with LIBOR manipulation, all of which examples of FSA mala fides have been identified in this blog! S.172 requires, inter alia, the duty of a company officer to promote the success of the company.
Section 172 of the Companies Act replaced a director’s duty to act “in good faith in the best interests of the company” with a requirement that the director must act, in the way he considers in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole. In doing so, the director must have regard to the following factors:
• The likely consequences of any decision in the long term.
• The interests of the company's employees.
• The need to foster the company's business relationships with suppliers, customers
• The impact of the company's operations on the community and the environment.
• The desirability of the company maintaining a reputation for high standards of business conduct.
• The need to act fairly as between the members of the company.
How Tinney could possibly have thought that any of these objects would have been promoted by suppressing this report is entirely beyond my comprehension, but it demonstrates the depth to which his own personal standards of honesty, integrity, and moral commitment had sunk, and further demonstrates beyond peradventure why he and his entire coterie of managers and directors are not fit to have the control of a whelk stall, never mind a public company.
I include his contemporaries in this, because they would all have been aware that the report was being compiled, and it is human nature that they would all have been aware of its potential contents. In fact Tinney (who received a package worth around £5 million a year in salary, bonus, share options and incentive payments) probably took the fall to protect others, which is why I am saying that the combination of a culture of dishonesty, moral bankruptcy and an integrity-free environment make it clear that the company is too infected with the morality of the back-alley thug, that place it well past redemption.
Tinney's announcement that he was responsible for suppressing the report enabled Barclays to make an internal announcement that he had resigned from his job last week. An internal announcement, you notice, not a public one. So much for the new transparency at Barclays that Jenkins was trumpeting!.
The report has exposed a culture of fear, intimidation, bullying and mismanagement at the bank’s stockbroking and investment arm, which is responsible for managing client assets worth £184 billion.
This report has come at an acutely embarrassing time for Barclays, as Anthony Jenkins now tries to regain public trust after a series of deeply damaging scandals.
The suppressed report paints a devastating picture of incompetence and arrogance at the bank, showing that executives, among other wrongdoing;
Pursued a ‘revenue at all costs’ strategy.
Fostered a culture of fear and intimidation.
Were ‘actively hostile’ to the idea of compliance with banking rules.
Presided over a ‘broken culture’ where problems were ignored or buried.
Allowed the business to spin ‘out of control’.
I have written and blogged repeatedly of the criminogenic culture which exists within the investment banking arms of global banks. These observations were not unique to Barclays.
I have advised the Regulators that such a state of dysfunction existed, for many years. They have either derided my observations or ignored my warnings.
This is why I have repeatedly said that this banking culture is a clone of an organised criminal enterprise and needs to be dealt with accordingly.
Part of the problem is that the Barclays own Godfather, Roberto 'the Diamond Geezer' Diamante, brought other Americans into the operation, men who believed that they knew how to manage better than anyone else, (the 'What can the Brits teach us that we don't already know' mentality), and who inculcated an atmosphere of fear and intimidation, refusing to countenance any opposition to their style of managerial control.
I have worked for two major American corporations and in my experience, bullying and intimidation is the sine qua non of some managers' style. Many American managers try hard to achieve consensus and to encourage their teams to think strategically, but some, particularly those who have worked in Wall Street and the City of London, are little more than a bunch of over-bearing braggarts and bullies. It grows out of the US lack of any employment-protection legislation, and means that these managers can get away with their dysfunctional behaviour and their rule of terror because no-one dare challenge them for fear of being sacked on the spot. This does not mean that many British managers are any better!
Again, this culture has become endemic at Barclays Wealth, and it will not be easily eradicated. It generates an environment where no-one is encouraged to make decisions or to feel empowered to think laterally, because of the all-embracing 'blame culture' that exists within the organisation. Again, for this reason, reform of the entity is now beyond hope, and a complete dismantling of the organisation must now be the preferred option.
Consider these quotations from the Report, and question whether this institution is fit to be allowed to continue in operation.
"...The current leadership team have pursued a course of “revenue at all costs”, taken a conscious decision to ignore support functions, reinforced 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..."
"...Management consciously failed to invest in necessary technology, people and safeguards that it knew it needed, leaving these areas understaffed, under-skilled, under-supported and in disarray..."
"...A conscious choice was made to ignore compliance until an issue was raised by the regulators – actively inviting intervention. There has been a total lack of accountability by the senior team..."
"...Management have created a culture of dominance and fear that has removed escalation of issues [the reporting of concerns up the management chain] and created a siloed organisation with serious flaws. Issues do not flow up but are buried, stopping any solution ever coming to light..."
"...This culture immediately removes anyone who opposes the managing director Mitch Cox and his team or who expresses dissent in any way… and prevents any counterbalance to the “revenue at all costs” strategy..."
One banker stated; ‘When I reported a compliance issue to a member of the management committee, I was told, “I don’t have time for this bullshit.’ Another said: ‘When we presented the risk report, an executive said “This is a piece of shit” – and threw it across the room.”’
One senior manager is accused in the report of being ‘incredibly defensive’ and of failing to take regulatory issues seriously. Another executive is said to have been determined to stop the inquiry team from gathering information. This individual, the report says, was regarded by colleagues as a ‘key contributor to the current culture of fear’.
"...The senior team portray themselves as all-powerful and all-knowing… and people chose to disagree with them at their own peril. It is a mentality of superiority which, when combined with other deficiencies, stops the team from tackling their blind spots. When those deficiencies are in compliance, this results in serious issues that no one else has the power to address.."
"...Stories circulate of individuals who have been fired because they brought issues to the management’s attention. It is culturally acceptable at BWA, from the top of the organisation down, to ignore, put off, and even deride risk and compliance issues..."
So, when taken as a whole, it becomes clear that Barclays Wealth is a financial entity long since past it's sell-by date. There is no excuse for the kind of behaviour and overbearing conduct which was sanctioned and condoned inside the operation, and it must now be closed down in the public interest.
When you come to review the findings in the report, you quickly realise that the authors were talking about an institution which had sunk into a state of profound anomie, a dysfunctional, normless state of regulatory limbo, a kind of suspended ethical animation, where normal conduct, regulatory compliance, honest behaviour, moral insightfulness, all had been turned on their head, to satisfy the over-inflated egos and over-paid men who ran the operation.
Institutions like this have not achieved this status overnight. The rot was allowed to set in many years ago, and it was encouraged to flourish and grow by an ad-mixture, of obscene over-payments, the advancement of psychotic personalities, the promotion of rule-breaking and other improper behaviour, the wholesale disregard for the rule of law and contempt for the regulatory regime. Anyone still working in this environment is compromised, their compliance officers tainted beyond hope of redemption, and their systems damaged beyond repair. You don't reform entities such as this, you recognise that like the rabid animal they have become, they need to be humanely destroyed, in order to cleanse the wider industry and to expunge their infected influence.
It must be observed that their continued existence owes as much of its provenance to the failings of the FSA as the lead regulator to identify severe failings in the structure, management and overall conduct of business by the Barclays Wealth personnel. Rogue institutions can only continue to conduct their illegal business when those supposed to regulate their activities, are either wilfully blind to their activities, or are too incompetent to see what is going on under their noses.
It may become necessary to re-visit the motives and decisions taken by Andrew Jenkins to employ Hector Sants as his new 'Head of Ethical Compliance' . Sants was in charge at the FSA throughout this era of dysfunction. He should be called to account for his failures to identify this criminogenic environment. The Parliamentary Commission on Banking Standards should consider calling him back as a matter of some urgency, if they want to retain a semblance of being thought to be a serious attempt to review banking practice.
More and more examples of appalling conduct and juvenile behaviour among Barclays' staff are being published.
is a great example.
These stories will continue to circulate, and they all add ammunition to the arguments of those who now say, 'enough is enough', shut this monster down!
We have reached the stage where we have to realise that by allowing these disgusting entities to continue in business, that we are being failed by a Government which wants to feather-bed the banks at all possible opportunities. If we want to see a climate of ethical conduct, fair dealings and the highest possible level of regulatory 'best practice' being identified in our banking sector, it would be in everyone's best interests if Barclays Wealth were to be placed into compulsory liquidation, "...pour discourager les autres..!"