Salz Review. Barclays Will Consider and Decide for Itself Whether, and If So How, to Act on the Views, Findings and Recommendations Contained in This Report
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0 Salz Review An Independent Review of Barclays’ Business Practices April 2013 Salz Review An Independent Review of Barclays’ Business Practices April 2013 Salz Review An Independent Review of Barclays’ Business Practices Disclaimer This Report has been prepared by Anthony Salz with Russell Collins acting as Deputy Reviewer (the Salz Review). The Review was set up by Barclays as an independent review reporting to a non-executive committee of Barclays. The views, findings and recommendations included in this Report are entirely those of the Salz Review. Barclays will consider and decide for itself whether, and if so how, to act on the views, findings and recommendations contained in this Report. The Review's Terms of Reference and the approach to the Review are described in Appendix A. The views, findings and recommendations are based on the Salz Review's assessment of the documents provided by Barclays or others in response to requests and information gained from interviews. The Salz Review has not conducted a forensic investigation or an audit of the information made available to it. In some cases restrictions were placed on the Salz Review's access to documents or documents were redacted by Barclays, in each case for legal reasons. The Salz Review has generally assumed the veracity of information provided. Other individuals considering the same information could form a different assessment of it. Similarly, the Salz Review might have formed a different assessment had it considered other information. Accordingly, the findings of the Salz Review should not be treated as determinative of any fact, nor of the performance of, or compliance with, any legal or regulatory obligation. The Report is not for the purpose of guiding or influencing the conduct or decisions of any person other than Barclays, including any investment or other financial decisions. Accordingly, it must not be relied upon for that purpose. In this respect and generally, Anthony Salz and Russell Collins accept no legal responsibility or liability for the contents of, or any omissions from, the Report. This Report is published at the request of Barclays PLC, consistent with the Terms of Reference. Salz Review Sir Michael Rake 4, Lombard Street Chairman, Business Practices Review London, EC3V 9HD Committee Barclays PLC 1 Churchill Place 3 April 2013 E14 5HP I am pleased to present to you my Report on Barclays’ business practices. This Review, in which I have been ably assisted by Russell Collins, sets out a number of recommendations. As contemplated in our Terms of Reference, we have developed these recommendations from conclusions we reached as to why, in a number of specific instances, Barclays’ behaviours fell below the standards it expected. Reports like this one inevitably concentrate on what went wrong, in order to find a better way forward. Accordingly they tend to read critically and negatively. We have sought to be balanced, but are mindful that some of this will be lost if our comments are taken and used out of context. Two points are worth making here. First, the problems faced by Barclays are to some extent industry problems – though Barclays should take no comfort from this. More importantly, despite the problems, there are many really good things about Barclays – not least that the overwhelming majority of its people are focused on doing their best for its customers, as reflected in the tens of millions of successful interactions every day. Since I was appointed to carry out the Review, there have been a number of significant changes, including the appointments of Sir David Walker as Chairman and of Antony Jenkins as Group Chief Executive. Together, you have already started the work to restore trust in Barclays. Our recommendations should not be taken to suggest otherwise. They reflect the position when we started our work last summer. We believe they should provide a valuable road map for the future. Barclays is a leading UK institution, with significant global businesses. The public rightly has high expectations. The changes envisaged in this Review will take time to have their effect. I welcome the start you have made. Anthony Salz Salz Review 1 An Independent Review of Barclays’ Business Practices Contents 1. Introduction to the Review .............................................................................................. 2 2. Overview and Recommendations ................................................................................... 4 3. The Importance of Banks and the Roots of a Crisis .................................................. 20 4. Barclays’ Evolution .......................................................................................................... 28 5. The Struggle for Survival through the Financial Crisis .............................................. 39 6. Conduct Matters .............................................................................................................. 52 7. Regulatory and Tax Matters ........................................................................................... 68 8. Culture ............................................................................................................................... 76 9. Board Governance .......................................................................................................... 98 10. People .............................................................................................................................. 120 11. Pay .................................................................................................................................... 130 12. Management Oversight and Risk Management ........................................................ 150 13. Conclusion ...................................................................................................................... 163 14. Appendices ..................................................................................................................... 165 Appendix A – About the Review ................................................................................ 166 Appendix B – What is Culture and How Can it Go Wrong? ................................. 177 Appendix C – Complaints Statistics ........................................................................... 196 Appendix D – Business Practices: Lessons from other Industries ........................ 198 Appendix E – Barclays Timelines: Overall and Main non-UK Geographies ....... 201 Appendix F – Barclays’ Governance Structure at Group Level ............................. 209 Appendix G – Barclays’ Employees ........................................................................... 211 Appendix H – Barclays’ Financial Evolution ............................................................ 212 Appendix I – Selected Bank Financial Ratios ........................................................... 222 Appendix J – Variability in Risk Weighted Assets Calculations ............................. 225 Appendix K – Correspondence between Lord Turner and Marcus Agius .......... 226 Appendix L – Glossary ................................................................................................. 231 Salz Review 2 An Independent Review of Barclays’ Business Practices 1. Introduction to the Review 1.1 The Board of Barclays PLC (Barclays or the Group) announced in July 2012 that it had commissioned this independent external Review of its business practices and had appointed me to lead it. The Review’s mandate is to determine how Barclays can rebuild trust and develop business practices which make it a leader, not only among its banking peers, but also among multinational corporates more generally. I take this as a commitment by Barclays not to be satisfied with following industry and regulatory standards if there are other higher standards that are attainable and meet the interests of its various stakeholder groups. Indeed, I regard this as entirely appropriate given Barclays’ position as a leading UK financial institution. Nevertheless I recognise that the extent to which Barclays is able to implement some of our recommendations depends on how the industry as a whole responds to the challenges it faces. It is in the interests of all its stakeholders that Barclays is successful and is able to compete effectively in each of its markets. 1.2 I have reported to a sub-committee of Non-Executive Directors (NEDs) of Barclays’ Board (the ‘Sub-Committee’). The Sub-Committee is chaired by Sir Michael Rake, Deputy Chairman and Senior Independent Director, and comprises Sir David Walker, David Booth and Sir John Sunderland. The Terms of Reference for the Review appear within Appendix A. 1.3 With the agreement of Barclays, I appointed Russell Collins as my deputy for the Review. I appointed The Boston Consulting Group (BCG) and Herbert Smith Freehills (HSF) to assist us. In this report I will tend to refer to the joint views of myself and Russell Collins by using the word ‘we’. 1.4 The Review was commissioned as an independent assessment of Barclays’ values, principles and standards of operation. We have considered Barclays’ Board governance, organisation and operating model, as well as its culture, people management and pay arrangements, and its risk and control systems. 1.5 As part of our work, we considered a number of significant ‘events’ which appear to have materially affected Barclays’ reputation. Our purpose was not to prove or disprove any allegations surrounding those events. Our brief