Barclays' little story and how it changed banking culture

Top City boys queue up, two by two, for a grilling.

This week has seen top City boys queuing up, two-by-two, as the Parliamentary Commission on Banking Standards (PCBS) called them in for a grilling on UK banking standards, rate-rigging scandals and big fat cheques.

In the firing line this morning was Anthony Jenkins and Sir David Walker, Barclay’s group chief executive and chairman, after Lloyds’ on Monday.

During an intense three-hour inquiry, Jenkins told the committee he was “shredding” the legacy left by his former boss Bob Diamond, after (quite publicly) rebuffing a £2.75m bonus having decided it would be “wrong” to receive a cheque too fully-loaded.

It is still far too early to see whether there has been any material change in Barclays’ culture. Rome wasn’t built, or-re-built in a day, and the jury will still be left with a few big questions over the British bank’s cultural DNA after today’s session.

Diamond on his part had received a £2.7m annual bonus for 2011, a pay check of £17m (with the bank paying also his £5.7 tax bill) after resigning amid the interest rate rigging scandal.

The boss was known to lead an "aggressive" and "self-serving" culture in the bank, the committee heard, while hush-hush talks in the City from former Barclays’ people push it a bit further, describing it as “rotten”.

The multimillion-bounty led to the forced resignation of Alison Carnwath, former chairman of the Barclays remuneration committee, who claimed to have been the lone voice for Diamond receiving "zero" bonus.

Along with Walker, Jenkins announced, avoided –and confessed- a few things.

The Committee jumped at the chance to enquire about The Bonus, remuneration and more specifically Sir John Sunderland, the man in control of it –he who replaces Mrs Carnwath.

“The problem we have with [Sunderland’s] evidence is that he didn’t think he had made a mistake (in regards to Bob Diamond's pay off), even in retrospect?” the committee asked.

“You'll have to trust my judgement,” replied Walker, in what looked more and more like a battledome.

Walker and Jenkins informed the MPs of a bonus slim down at Barclays following yet another £1bn provision to cover compensation for interest rate swap products and mis-selling of payment protection insurance (PPI).

According to Barclays, the scandal-hit year is now costing the bank around £2.6bn in compensation: PPI damages will go to borrowers who were (mis-)sold loan insurances (to protect them if they missed repayments due to illness or redundancy), but were not actually eligible to claim it.

During the tense discussion, Jenkins let out that he would step down if there was a regulatory failing under his watch.

This comment seemed too trouble-free for the Committee not to pick upon: Jenkins was head of Barclaycard from 2006, and throughout the time PPI products were sold.

“We worked hard to modify PPI products and we didn't get it right completely” was what Jenkins had to answer. He added: “it's a question of proportionality.”

This answer baffled the Committee; but not as much as when he spoke about the LIBOR-fixing –which cost the bank $450m in fines. “I first learnt about Libor on the day the Libor fine was announced,” he said.

When the committee asked him if he questioned the banking culture while working closely with Diamond, Jenkins took the time before calmly answering, “Yes.”

What he meant by this assent, was that he had been arguing “for a change in culture since 2012.”

Rumours were sparked by Committee chairman Andrew Tyrie when he said it was possible the Barclays bosses would be called in before the Committee again.

But next in line for the grilling are JP Morgan and HSBC’s heads, who will give the Committee more to query until their new report is published.

Photograph: Getty Images

Elsa Buchanan writes for VRL Financial News

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Why the Liberal Democrats by-election surge is not all it seems

The Lib Dems chalked up impressive results in Stoke and Copeland. But just how much of a fight back is it?

By the now conventional post-Brexit logic, Stoke and Copeland ought to have been uniquely inhospitable for the Lib Dems. 

The party lost its deposit in both seats in 2015, and has no representation on either council. So too were the referendum odds stacked against it: in Stoke, the so-called Brexit capital of Britain, 70 per cent of voters backed Leave last June, as did 62 per cent in Copeland. And, as Stephen has written before, the Lib Dems’ mini-revival has so far been most pronounced in affluent, Conservative-leaning areas which swung for remain. 

So what explains the modest – but impressive – surges in their vote share in yesterday’s contests? In Stoke, where they finished fifth in 2015, the party won 9.8 per cent of the vote, up 5.7 percentage points. They also more than doubled their vote share in Copeland, where they beat Ukip for third with 7.3 per cent share of the vote.

The Brexit explanation is a tempting and not entirely invalid one. Each seat’s not insignificant pro-EU minority was more or less ignored by most of the national media, for whom the existence of remainers in what we’re now obliged to call “left-behind Britain” is often a nuance too far. With the Prime Minister Theresa May pushing for a hard Brexit and Labour leader Jeremy Corbyn waving it through, Lib Dem leader Tim Farron has made the pro-EU narrative his own. As was the case for Charles Kennedy in the Iraq War years, this confers upon the Lib Dems a status and platform they were denied as the junior partners in coalition. 

While their stance on Europe is slowly but surely helping the Lib Dems rebuild their pre-2015 demographic core - students, graduates and middle-class professionals employed in the public sector – last night’s results, particularly in Stoke, also give them reason for mild disappointment. 

In Stoke, campaign staffers privately predicted they might manage to beat Ukip for second or third place. The party ran a full campaign for the first time in several years, and canvassing returns suggested significant numbers of Labour voters, mainly public sector workers disenchanted with Corbyn’s stance on Europe, were set to vote Lib Dem. Nor were they intimidated by the Brexit factor: recent council by-elections in Sunderland and Rotheram, which both voted decisively to leave, saw the Lib Dems win seats for the first time on massive swings. 

So it could well be argued that their candidate, local cardiologist Zulfiqar Ali, ought to have done better. Staffordshire University’s campus, which Tim Farron visited as part of a voter registration drive, falls within the seat’s boundaries. Ali, unlike his Labour competitor Gareth Snell and Ukip leader Paul Nuttall, didn’t have his campaign derailed or disrupted by negative media attention. Unlike the Tory candidate Jack Brereton, he had the benefit of being older than 25. And, like 15 per cent of the electorate, he is of Kashmiri origin.  

In public and in private, Lib Dems say the fact that Stoke was a two-horse race between Labour and Ukip ultimately worked to their disadvantage. The prospect of Nuttall as their MP may well have been enough to convince a good number of the Labour waverers mentioned earlier to back Snell. 

With his party hovering at around 10 per cent in national polls, last night’s results give Farron cause for optimism – especially after their near-wipeout in 2015. But it’s easy to forget the bigger picture in all of this. The party have chalked up a string of impressive parliamentary by-election results – second in Witney, a spectacular win in Richmond Park, third in Sleaford and Copeland, and a strong fourth in Stoke. 

However, most of these results represent a reversion to, or indeed an underperformance compared to, the party’s pre-2015 norm. With the notable exception of Richmond’s Sarah Olney, who only joined the Lib Dems after the last general election, these candidates haven’t - or the Lib Dem vote - come from nowhere. Zulfiqar Ali previously sat on the council in Stoke and had fought the seat before, and Witney’s Liz Leffman and Sleaford’s Ross Pepper are both popular local councillors. And for all the excited commentary about Richmond, it was, of course, held by the Lib Dems for 13 years before Zac Goldsmith won it for the Tories in 2010. 

The EU referendum may have given the Lib Dems a new lease of life, but, as their #LibDemFightback trope suggests, they’re best understood as a revanchist, and not insurgent, force. Much has been said about Brexit realigning our politics, but, for now at least, the party’s new normal is looking quite a lot like the old one.