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November 28, 2012 5:28 AM GMT

UK Bank Standards, Bonuses and Scandals: Barclays' CEO and Chairman Questioned by MPs

Welcome to IBTimes UK’s Special Live Blog

Hello, I am Lianna Brinded, senior business journalist for IBTimes UK.

I will be blogging real time on the Parliamentary Commission on Banking Standards (PCBS) hearing at 0945GMT, which will be hearing evidence from Antony Jenkins, Group Chief Executive at Barclays and Sir David Walker, Chairman at Barclays and in the lead up to the event.

If you would like to get in touch with any comments, please email l.brinded@ibtimes.co.uk

by l.brinded 2/5/2013 9:33:48 AM
Banks Increasing Mis-Selling PPI and Derivatives Compensation Pots

Being asked direct questions by MPs is a sure fire way to get more indication and facts over the size of compensation they have set aside for customers who are disputing the sale of PPI or an interest rate hedging product.

Yesterday, Lloyds executives finally put a number to the volume of cases it had determined to be mis-sold so far (less than 60) and told MPs that it had set aside £90m in total.

Just before Barclays executives are set to give evidence to the PCBS today, it said it had increased the pool of cash it will need to pay back customers who were improperly sold PPI by £600m.

Collectively, the bank said it has set aside £2.6bn and paid out £1.6bn as of 31 December.

It also said it will increase its estimation of the cost of repaying small and medium-sized businesses who have been mis-sold interest rate derivatives by £400m.

That brings the total cost of compensation to around £850m as of 31 December.

by l.brinded 2/5/2013 9:35:51 AM
Barclays Bonuses and Paying for Litigation Costs and Fines

Barclays has been, somewhat, the most prolific and fervent when it comes to addressing bonus and fine payments, as well as tackling customer compensation.

Here are some recent articles by IBTimes UK to catch up on before the hearing starts:

Barclays CEO Antony Jenkins Forgoes Potential £2.75m Bonus

Barclays Axes Hundreds of Jobs at UK Investment Bank [EXCLUSIVE]

Libor Fixing Scandal: Barclays Considers Cutting Bonuses to Pay For Fines and Costs

by l.brinded 2/5/2013 9:42:03 AM
(Chart: Google Finance)

by l.brinded 2/5/2013 9:45:49 AM
Andrew Tyrie MP opens questioning to Jenkins and Walker about ring-fencing

Walker says they support this but an independent report over the implications of a ring fence is needed

by l.brinded 2/5/2013 9:57:04 AM
Tyrie says that Barclays has had their finger in "all the pies" - PPI, interest rate hedging products to SMEs etc.

Walker: The conventional causes of failure at many banks didn't happen to Barclays years ago. When we appointed the CEO (Jenkins) we did ask whether the CEO would be able to implement significant changes in the short and long term banking strategy.

Jenkins has worked flat out with this. We are now out of the phase of conception to implementation

by l.brinded 2/5/2013 9:59:44 AM
Walker defends the release of Libor fixing evidence to PCBS because of the ongoing investigation.

We want openess and frankness with the individuals that are part of an ongoing investigation.

by l.brinded 2/5/2013 10:01:02 AM
Walker: The Chairman has to be satisfied over the quality of each individual [to make changes with the banking culture and standards], we have two new board members and others in the pipeline that I am hoping to introduce later in the year.

by l.brinded 2/5/2013 10:03:38 AM
Sir David Walker (Photo: Parliament TV)

by l.brinded 2/5/2013 10:04:08 AM
Walker: I sit on the Remuneration Committee and I can talk with competence and authority of how it functions now. I am not involves in the mistakes of the past, and there were mistakes, and I am interested in the decision making process now.

I am satisfied that the Remuneration Committee is, at the moment, working son a satisfactory basis.

I agree [that bonuses should down as well as up].

When hard times come, incentive pay is reduced. Now that model is being changed and I am concerned that if fixed pay becomes more variable then there will have difficult effects on paying going up, as well as down. The CRD4 from Brussels which one consequence to push fixed pay up - not at Barclays but this is an example for others.

by l.brinded 2/5/2013 10:05:22 AM
Walker: We have spent a huge amount of time discussing incentives but not on fixed / variable pay.

My concern and where I say that there has been most egregious failure is in variable pay.

by l.brinded 2/5/2013 10:09:46 AM
MPs ask on bonus deferrals:

Jenkins: The requirement for deferral is in line with the FSA rules on deferring bonuses. If you work at an institution for many years, you have multiple deferrals working at any one time.

by l.brinded 2/5/2013 10:12:56 AM
Walker: Barclays has not had significant problems from conventional problems of risk that other banks have had.

We have two Risk Committees. One that I chair is looking at risk at board levels and survey the embedding of the new culture at the bank. We will give more explicit and deliberate attention.

by l.brinded 2/5/2013 10:14:36 AM
MPs ask about the memo Jenkins sent to staff about new banking culture standards and values

Jenkins: One thing Barclays did not have in the time I have been here is a set of standards. If I look across the group over the last 20 years or so, there have been circumstances where we have been too aggressive, too short term focused that have led to problems.

It is important oxygen to create new things happening and antioxidants to the bad things from happening.

by l.brinded 2/5/2013 10:17:31 AM
Jenkins: I think the culture I am describing in the document will not just prevent bad events from happening again but will also make us more commercially viable in the future. I wrote this because I wanted to show people that they can be part of something more important and bigger.

Remuneration question is a difficult one. The level of pay is very high [in the industry]. It is competitive because you have to attract talent [through high pay]. I do think though that we will be more attractive because of the values of the bank and will mean people are less concerned about the marginal difference on pay.

by l.brinded 2/5/2013 10:20:38 AM
Jenkins: We used the heritage of Barclays as part of the process of formulating the new values and culture. We didn't commission a marketing company to do this, we talked and worked with colleagues to determine new strategies.

by l.brinded 2/5/2013 10:24:46 AM
Jenkins: We can't have vibrant economies, without a vibrant banks and therefore a vibrant society. The balance scorecard of how we are implementing changes and the changes to value is indicative of how we are going to get there

by l.brinded 2/5/2013 10:27:32 AM
Antony Jenkins, CEO at Barclays (Photo: Parliament TV)

by l.brinded 2/5/2013 10:28:57 AM
Baroness Susan Kramer asks about remuneration again

by l.brinded 2/5/2013 10:31:27 AM
Jenkins: We didn't have any management consultancies looking into making changes at the bank. On culture, it is of course the force that prevents bad things happening, unethical things. It is a very important driver and performance of the business. It is key to creating a more successful company.

by l.brinded 2/5/2013 10:32:53 AM
Jenkins: We will measure individuals on the services they will provide. Everyone will have a set of goals that are aligned to the balance scorecard. On the values side, through statistical surveying, of how the values are being implemented and therefore how events are improving over time.

by l.brinded 2/5/2013 10:36:36 AM
(Chart: Google Finance)

by l.brinded 2/5/2013 10:37:25 AM
Jenkins: This year's bonus round, the board and I have made a judgement on the performance of the individual business units for their bonuses. We have substantially changed the bonus pools after intense scrutiny at the RemCo. This also includes seeing if disciplinary action is needed.

There will be assessments on individual performance and we assign a performance rating on a five point scale and this has been usually driven by what and how you have delivered. For instance, it wouldn't be a successful financial year without implementing or carrying out the goals set.

by l.brinded 2/5/2013 10:41:22 AM
Mis-Selling Derivatives and PPI:

Jenkins: I can assure you 100% that the provision we gave today on mis-selling has resulted from reductions in compensation pools for staff.

by l.brinded 2/5/2013 10:44:10 AM
Pat McFadden MP asks about the reports over questionable actions and language at Barclays Wealth over the treatment of clients

Jenkins: The report you are referring to is from Barclays Wealth in America which is an exemplar of some of our problems.

by l.brinded 2/5/2013 10:47:11 AM
Jenkins: It's not about the letter I wrote, it's about whether the changes better serve society at large, our shareholders and our colleagues. This will take time and will take an iron will and resolve to make this happen. We will rightly be held accountable about making this happen. I guarantee that you will see improvements over time.

by l.brinded 2/5/2013 10:51:24 AM
Jenkins: We haven't fired anyone or had anyone leave because it is still an ongoing investigation [fundraising probe]

by l.brinded 2/5/2013 10:53:32 AM
Jenkins: we have not discussed this [whether to sell the investment bank]

by l.brinded 2/5/2013 10:53:56 AM
Jenkins: We cannot talk about this [Guardian Care Homes Case] because this is an ongoing legal case but on the broader point we will be judged on our actions and I expect we are being held accountable over this performance and there will be difficult trade-offs.

by l.brinded 2/5/2013 10:55:33 AM
Jenkins: We should shred the mistakes and behaviour of the bank in the past and move forward

by l.brinded 2/5/2013 10:57:35 AM
(Chart: Google Finance)

by l.brinded 2/5/2013 11:03:39 AM
Walker: While the BBA has committed to give resource to put a banking standards board in place, precisely how it's done; there are two observations. While there should be a banking presence at the board, there should also be a non-banker to have the quality of independence. There should be a majority of non-bankers as well to give it this independent quality.

I do question over whether to improve banking overall is that it is all powder and shot if we don't have a disciplinary structure in place.

by l.brinded 2/5/2013 11:07:31 AM
MPs ask whether it is possible for two authorities to be in charge of disciplinary action. MPs used the example of RBS' ex-Chief Fred Goodwin not being 'fired' 'because the regulator didn't strike him off.'

Walker: One would start with the noble ambition with a particular area to implement these disciplinary standards and branch it out. HI would invert and give the FSA greater power in [in striking off any bankers that it have a high burden of proof of wrongdoing against them]

by l.brinded 2/5/2013 11:12:11 AM
Sir David Walker, chairman at Barclays believes in stronger disciplinary action and power from the banks and the FSA (Photo: Parliament TV)

by l.brinded 2/5/2013 11:14:51 AM
Walker: Of course we would like close collaboration with the regulators to make sure changes are being implemented to banking standards.

by l.brinded 2/5/2013 11:17:01 AM
Walker: I emphasised the need for independence on the changes needed in the banking industry.

by l.brinded 2/5/2013 11:18:10 AM
Mark Garnier MP brings up sub-committee evidence from Barclays' ex-compliance officer Walters and asks for Jenkins to explain Walter's evidence over the role in compliance:

Jenkins: It's a bit like the rule of law. One expects the citizen to follow the rule of law but that doesn't mean you have an effective police force. Compliance is a police force. I expect my leaders to run their businesses that is compliant with the letter of the law and that responsibility of the first line of defence. But you also need a wholly independent compliance function to police this. The third line of defence is internal audit. But you cannot not have a compliance function within two camps.

by l.brinded 2/5/2013 11:22:06 AM
On Libor Fixing:

Jenkins: Clifford Chance prepared a review and a report on Libor manipulation for Barclays and we have taken disciplinary action or dismissed those who were instrumental in this.

I only knew about Libor fixing when the fine was announced.

by l.brinded 2/5/2013 11:24:01 AM
On Libor Fixing:

Jenkins: I don't think it is fair to say that no other executives knew about Libor fixing but I was not part of that business at the time (he was actually Barclays head of retail and consumer banking and not in the investment banking arm where the people in a unit that manipulated rates were found)

by l.brinded 2/5/2013 11:26:42 AM
On Libor Fixing:

Jenkins: I am not seeking to justify the events surrounding Libor and we dealt with it that we saw fit. But I will say that prospectively that we have absolute control over what is happening in the organisation. We have lots of legacy issues and we are dealing with it appropriately.

by l.brinded 2/5/2013 11:29:41 AM
Jenkins: I am already accountable to the regulator, the board on everything that happens at Barclays. I regard my job to be always accountable to the board, shareholders and regulators and society.

[MPs are asking whether Jenkins would resign if there is a hypothetical situation should Libor fixing happen again under his watch. Mark Garnier MP asks would he 'take it like a man' and step down before pushed should something hypothetically happen under his watch in the future]

by l.brinded 2/5/2013 11:32:41 AM
Andrew Tyrie MP asks Jenkins to confirm that he doesn't subscribe to ignorance as a defence

Jenkins says he agrees with this perception.

by l.brinded 2/5/2013 11:36:14 AM
@LiannaBrinded I'd reply: does this hypothetical resignation apply to future expenses scandals? #duckponds

by Martin Baccardax via twitter 2/5/2013 11:37:03 AM
Jenkins: Looking back, Barclays didn't respond to the changes in the industry quickly or sufficiently enough.

by l.brinded 2/5/2013 11:40:37 AM
Shares at a high (Chart: Barclays)

by l.brinded 2/5/2013 11:41:15 AM

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