Salz Review: bankers tried to 'win at all costs'

As reported by the Guardian, the Salz Review, an independent review of Barclays, found that its bankers tried to 'win at all costs' even if this meant violating the spirit of the law.

For regular readers, there is nothing surprising in the report.  It simply reflects the behavior that bankers will engage in when their actions are shrouded behind a veil of opacity.

There is only one way to end this behavior and that is to bring in sunlight as the best disinfectant.  At a minimum, what is required is that banks disclose on an ongoing basis their current global asset, liability and off-balance sheet exposure details.

This will minimize, if not end entirely, behavior like manipulating benchmark interest rates, Libor for example, for profit or taking proprietary bets.

Barclays bankers were engulfed in a culture of "edginess" and a "winning at all costs" attitude, according to the top lawyer appointed to lead a review into the ethics of the embattled bank. 

In a 244-page report (pdf) – which cost £17m – compiled after interviews with 600 individuals in the wake of the Libor-rigging scandal, Anthony Salz calls on Barclays to strengthen its board, bolster its human resources function and link its pay to the "long-term success of the organisation". 

"Based on our interviews, we could not avoid concluding that pay contributed significantly to a sense among a few that they were somehow unaffected by the rules," the report said. 

"A few investment bankers seemed to lose a sense of proportion and humility." 

The strongest culture was inside the investment bank, which Salz said was focused on success. But, he noted: "Winning at all costs comes at a price; collateral issues of rivalry, arrogance, selfishness and a lack of humility and generosity"...

Divisions previously run by Diamond's successor and current chief executive, Antony Jenkins, are also highlighted. Barclaycard had a culture of making money ahead of customer satisfaction while the retail bank had a focus on sales where loans sold with payment protection insurance generated two-and-a-half times more commission for staff than loans sold without the discredited insurance. 

Salz found that the board should have "set the tone" of culture from the top but "with the benefit of hindsight we believe that the Barclays board did not give sufficient attentions to this area", the report found, and was not able to penetrate the structure of the bank....

Opacity even blocked the board's ability to see what was going on.

Barclays had an "edginess and strong desire to win", said Salz. "Barclays was sometimes perceived as being within the letter of the law but not within its spirit. 

Actually, Barclays was frequently outside the letter of the law ... see manipulating Libor for example.

The only way to restrain the actions of the bankers is to subject their actions to transparency at all times.  This is what requiring the banks to provide ultra transparency does.