The Tabloid Test: Even bankers understand why sunlight is the best disinfectant

As reported by the Wall Street Journal, Barclays is in the process of putting each of its businesses through the "Tabloid Test".  The test asks the simple question of if the business was in the paper tomorrow, would you be proud.

Barclays' exercise confirms the need for requiring banks to provide ultra transparency and disclose on an ongoing basis their current global asset, liability and off-balance sheet exposure details.

With this disclosure, the market can help Barclays by doing a "Tabloid Test" on an ongoing basis.  This is why sunshine is the best disinfectant.

Barclays is looking to rebuild its reputation after it admitted to attempts to rig the London interbank offered rate, or Libor—the rate at which banks lend to one another. Mr. Ricci said the investment bank is now looking at its businesses through a "reputation lens" and deciding whether to keep them going. 

"Would they pass the tabloid test?" asked Mr. Ricci. "If you read about the activity in a newspaper, would you be proud?" 

Secondly, could this activity lead to problems in the future, he asked. To this end, the bank is considering axing several activities, including its tax-advisory and agricultural commodities trading businesses, he said.

Ultra transparency would let the market help with the question of could this activity lead to problems in the future.  As you can imagine, many of the tax-advisory strategies would not past the market smell test if disclosed.