Views on improving the integrity of global capital markets
28 January 2013

Barclays’ New Ethics Code: Is It Enough to Right Recent Wrongs?

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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About the Author(s)
Claire Fargeot

Claire Fargeot is a former head of Standards and Financial Market Integrity at CFA Institute for the Europe, Middle East, and Africa (EMEA) region. She was responsible for leading CFA Institute efforts in advocacy, policy development, and regulatory outreach in EMEA.

4 thoughts on “Barclays’ New Ethics Code: Is It Enough to Right Recent Wrongs?”

  1. Donna Boehme says:

    So we have the talk, let’s see the walk. Management’s public statements about 5 new values are a start, but culture change requires more than a piece of paper. The rest is hard, and it starts with ethical leadership metrics integrated into performance, promotion & compensation plans.

  2. Claire Fargeot says:

    Many thanks for your comment Donna — I couldn’t agree more. Time will tell.

  3. Zain says:

    This seems more like a PR face saving gesture rather than an overhaul of their corporate attitude. It will be interesting to see how/if Barclays put their money where their mouth is.

  4. Mr Banker says:

    The face of banking is changing, Barclays have taken a while to catch on. This is an article from a while ago, which details how banks are moving from hard sales to service:

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