The announcement last week from the new Barclays CEO, Antony Jenkins, that employees who do not wish to adhere to a strict new ethical code of conduct should quit the bank and find jobs elsewhere is an obvious step in the right direction for a bank attempting to rebuild its badly damaged reputation.
There have been a significant number of failures in the bank’s conduct — its manipulation of LIBOR chief among them — and newspaper reports of executives pursuing a ‘revenue at all costs’ strategy, fostering a culture of fear and intimidation, being ‘actively hostile’ to the idea of compliance with banking rules, and allowing the business to spin ‘out of control’. With the announcement of the ethics code, 140,000 employees globally have received the message that these types of behaviours will no longer be tolerated and that this new set of standards will be used to judge the performance of every employee. The strong tone is unlikely to surprise either employees at the bank or investors, but is it going to be enough?
Admittedly other steps have been taken internally. An independent review of the bank’s culture and business practices is underway, and Mr. Jenkins also will unveil a new strategic plan for the bank in February. It is anticipated that these reviews will provide the blueprint for the Barclays of the future, realigning employee, client, and wider society interests with those of the bank. Furthermore the management team has been renewed and strengthened by the arrival of a new head of compliance and government relations activities, Sir Hector Sants, the former head of the U.K. regulator, the Financial Services Authority (FSA). Given these top-level impending changes, do we now feel reassured that the string of bad news is finally over for Barclays? Do we now feel confident that new management will deliver better outcomes for its employees, customers, and its investors?
It is good to see some banks starting to take steps to transform bad business practices and greed-driven cultures. Consumers and investors want a banking profession that can be respected, with all bank representatives meeting high professional standards and complying with a fully independent code of conduct, backed by statute, with genuine sanctions for malpractice. The British Bankers Association (BBA) has recently unveiled details of its plan to shake up standards in the sector with a new code and register for bankers. The plans include a new independent banking standards review council to monitor ethical behaviour as well as a strengthening of existing rules. It is anticipated that the new body is likely to have the same powers as other professional bodies, with the ability to strike off misbehaving members as well as monitor the effectiveness of whistle-blowing regimes in banks. As part of a strengthening of existing rules, banks would be forced to report any disciplinary proceedings against staff. The approved person’s regime would also be extended to include the more consumer-facing roles, as requested by the FSA, with more resources dedicated to tackling fraud and financial crime. Also the BBA is calling on the FSA to issue guidance or set standards in the training and development of bank employees.
Both Barclays and the BBA have recognised the need to fundamentally strengthen the ethical and professional standards among individuals in the banking sector. The five new principles from Barclays’ ethical code of Respect, Integrity, Service, Excellence, and Stewardship are honourable but hollow if employees are not empowered to live by them. Clients’ interests must come first, and the time has come for the banking profession to take responsibility for rebuilding its reputation. Focusing squarely on putting client interests first is a basic element of sound ethical practice that all bankers should look to improve. If there is a continued collective effort for a greater focus on conducting business with ethics in mind, then — and only then — will everything really be OK.
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