Time for Barclays tabula rasa

By Etoile Partner, Martin Roche

On Monday, my colleague, Trevor Datson, suggested that Barclays Bank chief executive, Bob Diamond, would be unlikely to hold out against the clamour for his head to roll in the wake of the LIBOR rate fixing scandal. Trevor’s instincts were spot on, for the very next morning, even before London’s financial markets were open, Mr Diamond had quit. Now it’s said in informed circles that what finally did for the mega-high-earning Mr Diamond was pressure from the Governor of the Bank of England, Sir Mervyn King, and from the Chairman of the UK Financial Services Authority, Lord Adair, for him to fall on his sword. If the rumours are true, and they make perfect sense to me, the regulators have acted at speed to try and limit the reputational damage to the City of London, send a signal to the world that the authorities are firmly in charge and give Barclays the earliest possible chance to start again with a tabula rasa – a clean slate.

So, what kind of man or woman is needed to rescue one of the world’s biggest banks from the trough of public despair and disgust into which Barclays has been plunged by the LIBOR rate-faxing, the miss-selling of retail and small business products, legal but publicly unpopular tax avoidance practices and a breathtaking degree of corporate arrogance by its now departed chief executive?

Who runs Barclays matters to the global economy and particularly to the places Barclays does most of its business, London and New York. The bank came through the crash of 2008 in a strong position and with a balance sheet that allowed it to snap up what was left of Lehman Brothers to become a much bigger player on the New Your investment banking scene. That fast and clever move was seen as a typically self-confident piece of entrepreneurial chutzpah of the type that had for centuries put London at the forefront of world finance.

Who runs Barclays matters, because the banks – those bailed out by the taxpayers and those like Barclays that were not – have since the crash of 2008 to keep winning the public’s “licence to operate”. How they behave is no longer simply a matter for shareholders and regulators, but also for politicians and the general public. All of the banks hold our financial future in their hands. The indebtedness of the UK’s banks is greater than the entire GDP of the United Kingdom, so now they are playing in the last chance saloon. More scandal and more failure could result in the City of London losing many of the privileges and tax benefits that give it a global competitive edge. The public wants the City to succeed, but not at any price.

The challenge for the new boss of Barclays will be to find ways of keeping the bank rich in swashbuckling dash, derring-do and breathtaking deal-making, whilst reducing reliance on high-risk trading and derivatives products, expanding lending to business in what is still a very uncertain market, satisfying the ordinary banking needs of corporate and retail customers, giving regulators little cause for concern and rebuilding the bank’s reputation for integrity. Perhaps even bringing it back to being the uncompromisingly principled and scrupulously honest bank of its Quaker founders. Maybe our readers will tell me if they think I’m being naïve in seeking a more ethically based banking culture.

Without doubt, the new boss at Barclays will need the toughest and thickest of skin, lots of high level experience in finance, in managing people and turning strategic theory into winning banking for customer and shareholder. But I venture that it will be personal values and strength of character that will wholly condition whether the new captain steers a straight and true course safely into port or strikes a reef and goes down with the ship. He or she will need an outstandingly gifted head of communications who comes with an equally strong reputation for integrity and strength of character. Such creatures are rare in most walks of business and public life and have all but disappeared from the City in recent years.

Let me give you an example of the type of advice the new Barclays’ communications chief must have the guts and experience to give his chief executive. Yesterday, the departed Bob Diamond gave evidence before the Treasury Select Committee of The House of Commons, one of the most powerful committees of Parliament. Now Mr Diamond is an American, though he’s no stranger to the UK, having lived here for 16 years, so he knows how the British behave in formal and informal situations. Yesterday he referred to every member of the Select Committee by their first name. That action sent all the wrong signals. Firstly, it showed discourtesy to Parliament and to the Committee (the Committee chair and members at all times called him Mr Diamond). It could also mislead the outsider into thinking that Mr Diamond and each Committee member are personal friends. What Mr Diamond appeared to be trying to do was what we in the communications business call “borrowing interest.” In short, he was trying to get some of the status and authority of the Committee and its members to run off on him and convince us he is as good a guy as they are and not the banker he is thought to be. Personally, I would not buy a used car from Mr Diamond. But he is history. His successor has to have very special qualities and a truly brilliant communications machine in support. Advice note Number 1 – when in formal settings be formal. That’s how proper bank managers behave.

Anything else will not be a tabula rasa. It will be a false start not a fresh start.