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I notice that the appointment of Bob Diamond as Group Chief Executive of Barclays has caused a large amount of uproar this week. Vince Cable has predictably waded in with his “casino banking” comments and Matthew Oakeshott, the Lib Dem treasury spokesman said “he’s a great gambler but has no experience of retail banking”. Ouch.
Few would understate the importance of Bob Diamond in transforming the small investment banking arm of Barclays, BZW, into the international giant that is now Barclays Capital.
For me, this raises a number of questions:
Is it fair to label one of the greatest bankers of his generation as a “gambler”?
Is it appropriate for the Government to criticise the board appointments of a public company that has not been part of a taxpayer bail out?
Are Barclays right to appoint an investment banker to run retail bank?
Your comments, as ever, would be appreciated.
Andrew McIntee is a Director and Head of Financial Services at Interim Partners
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September 10th, 2010 at 7:37 am
What your reply fails to note is that investment banking is as different as chalk and cheese from commercial banking. This suggests a non sequitor in the conclusions you draw. Mr Diamond has no proven achievement in terms of running a retail bank though he may be in all other respects a very
able investment banker.
The other truly astonishing implication of your conclusion is that you are choosing to ignore the fact that links between investment banks and commercial banks (with Hedge Funds being brought in towards the end of the tale) are the authors of the global financial and economic crisis. Will we never learn? Ouch!
It is sensible to ensure in future that commercial banks, guaranteed by the taxpayer, should return to their primary role which is bank intermediation and should not be allowed to become too big to fail by curbing balance sheet growth.
The decision to appoint Mr Diamond gives a signal that the British banking industry is going to resist, at every turm, any serious moves to ensure that commercial banking activities are kept prudently separate from investment banking. He will be in good company with Stephen Hestor of RBS.
This is a pragmatic recommendation which reflects an understanding of the casuses of the crisis. I am not proposing a fresh version of Glass Stegall in the aftermath of 1929: only a sensible and enforceable demarcation between industries which are, in reality, very different.
September 10th, 2010 at 7:53 am
Andrew, I think it was highly likely that the appointment would be challenged! Democracy and openess is generally a healthy a self correcting process, and key appointments stand public strutiny. The issues of seperating the investment side from retail banking is a good one.
The issue is whilst most banks internally remain very inneficient, and pretty bad at managing risk and are getting slated for customer service. The real problem for most banks is the value of their assets on their balance sheet, and whether in light of the recent profit announcements there are those with the integrity to admit and make provisions so banks remain to be properly governed and solvent. The public pressures are hugely sensitive too.
Those with unblemished careers are unlikely to admit to mistakes, and what is really required is to get back to basics, and run a bank like any other business with good processes openess, robust business model and integrity.
That said – no idea if Bob Diamond is the right man for the job!
September 10th, 2010 at 10:31 am
Andrew, the straightforward response to your first 2 questions is “absolutely not”! For your 3rd question, Barclays comprises 4 major divisions: retail, corporate and business banking, investment banking and wealth management. As Group CEO, Diamond will guide strategy and allocate capital and management resources between the 4 divisions to optimise shareholder value in the long term, whilst working with the Board, the divisional management teams and other stakeholders (customers, employees, regulators, government etc) to run each business both profitably and prudently, in accordance with applicable regulation. If regulators and government cannot grip this simple fact, they should re-enact the Glass-Steagall Act!
September 10th, 2010 at 12:05 pm
No, these comments are totally unecessary and inappropriate. The Lib dems have no experience of government, and have shamelessly prostituted their policies for a few seats at the top table, where they are simply out of their depth.
Vince Cable claims to be the only person who saw the looming banking crisis, but anyone with a modicum of intelligence could see that the house of cards was eventually going to fall down, and I don’t recall any great speeches from him before the event.
As ever, the Lid Dems are simply preaching the politics of envy… if anyone is successful, that success must be due to luck or privilege, in which case they should be taxed to levels that not even Blair/Brown considered.
Why should success not be rewarded?
September 10th, 2010 at 1:06 pm
Barclays’ British based senior management admitted that even though they did not accept British tax payers’ money, had the Government not propped up the other banks, Barclay’s would probably have failed. Therefore the Government has not only the right but a duty to comment on this subject. I am a very long term retail customer of Barclays but will seriously reconsider my position when Mr Diamond takes over Retail Banking.
I was never in favour of repealing the Glass Stegal Act and human nature being what it is the dangers of allowing investment bankers to “play” with other ordinary people’s money via black boxes is simply not acceptable. The money does not trickle down as we were always told it would, our economy is a basket case because the last government believed the investment banking and hedge fund communities as well as the Nobel prize winning economists from Chicago that there was no longer any risk.
We need real competition in banking in this country now. If the Barclays Board want to walk away from retail banking, they should do so quickly. Mr Diamond is not concerned about anyone nor anything in this country so we cannot expect that he will do anything in our interests. He no doubt is planning how he can get his hands on British saver’s money
September 13th, 2010 at 1:51 pm
Richard, thanks for your comments, although you will see from my initial post I have drawn no conclusions at all. The point of our “Dialogue” section is to generate commentary from the interims in our network by raising topical issues occurring in the sector which we can then discuss. I posed 3 questions for discussion on the appointment of Bob Diamond as Barclays CEO, but have drawn no conclusions as you suggest.
Mary-Ellen I think you make a good point in that although Barclays received no taxpayer bailout directly, through their admission that they benefited from the Government supporting others in the sector, they are surely guilty by association. Based on this I agree with you that the Government does have right to question Mr Diamond’s appointment as recent history tells us that they could be carrying the can if it goes wrong.
On balance, I think Richard is right in that by choosing to appoint an investment banker as Group CEO, talented or otherwise, Barclays are not taking seriously the opinions of the Government, regulators and general public who almost universally wish to see investment banks run separately from retail banks. This decision could be viewed as politically insensitive at best.
September 17th, 2010 at 5:04 pm
Barclays has a bit of a dilema as it is a Global Banking Operation that is into retail and corporate banking, investment banking and wealth management and credit card operations, that happens to be based in london for historical reasons.
Barclays ambitions were (and still are?)to be a top 3 player in Europe and top 10 worldwide. The biggest value generator to date is the global investement banking side run by Mr Diamond. Retail never made that much money for it’s size and is predominantly UK.
Given Bob’s record – he is pretty good and not just lucky – who would be better to run Barclays from their shareholders perspective?
We should remember that the previous CEO John Varley tried to buy ABN AMRO and got lucky losing out to RBS? It will be interesting to see how Diamond performs and what his strategy will be….and wherher the governments concerns are justified
Gary