Barclays

  • 06 Feb 2013 at 9:12 AM

Layoffs Watch ’13: Barclays

The Brits are said to have alerted some staff that their services are no longer required at the bank. Read more »

Mr. Jenkins and the firm’s chairman, David Walker, told politicians on Tuesday that they were prioritizing ethics and reducing risky trading activity, adding that they would take responsibility if future problems were discovered at the bank. The Barclays’ chief, who agreed to forgo his bonus in response to the series of scandals that have hit Barclays in recent years, said he would resign if another scandal was uncovered while he was leading the bank. “The chief executive is responsible for what happens during their tenure and when incidents happen the price needs to be paid and I believe were I to find myself in that position I would do the right thing,” Mr. Jenkins said on Tuesday. When politicians asked Mr. Jenkins if he was eradicating the culture that he inherited from his predecessor Robert E. Diamond Jr., Barclays’ new chief said he was indeed “shredding that legacy” of sometimes being “too self-centered and too aggressive.” [Dealbook, related]

We’ve talked a lot about bank capital today but there’s still time for one quick addendum. First, though, two rough-and-ready equations:

  • Capital = cash paid in by shareholders plus retained earnings
  • Capital ratio = capital divided by assets

The first equation explains my puzzlement at the claim that Deutsche Bank “book[ed] a loss to boost its capital ratio without selling shares;” it’s arithmetically impossible to boost your capital by losing money, though you can (separately) boost your capital ratio by fiddling with the denominator.

The important thing about the second equation is that, for banks, the ratio is well under 1. So if your capital ratio is a relatively robust 10%, that means that 90% of your total assets are funded with borrowed money, and 10% are funded with cash from shareholders and retained earnings. Some people dislike this system.

Anyway there are various semi-magical ways to monkey with the denominator but there is one simple and obvious way to monkey with the numerator – the actual amount of capital that you have – and it is this:

  • Take some money,
  • dress it up in a fancy costume, and
  • issue some new shares to the the now-cleverly-disguised money.

You have magically transformed Assets (money) – which, remember, are 90%+ funded with borrowed money – into Capital. This has perpetual-motion-machine properties,1 so it’s pretty good.

Also it is, like, wildly wildly wildly illegal. Or, I mean, it’s pretty illegal as I just outlined it above, but if you put a fancy enough costume on the money maybe that makes it okay.2 Anyway draw your own conclusions about this: Read more »

No more long, dragged out firings. No more dread-filled days wondering if HR is coming for you and, if so, when. If you’re a Barclays employee set to be canned, you’re getting canned A-SAP. Read more »

Earlier today, Barclays chief Anthony Jenkins sent out a memo to employees informing them that moving forward, there’d be a new way of doing things ’round the bank. Namely, that whereas during his predecessor’s tenure, manipulating interest rates and engaging in other forms of criminal activity was acceptable, such things would no longer fly. And not in a “this sort of thing is now frowned upon” way but in a “you actually can’t do this anymore/if that presents a problem for you than clean out your desk and leave” way.

Aware that change can be very difficult, that it often causes great anxiety, and that many resist it entirely, Jenkins used 1,479 words to get his message across, acknowledging that not all employees will be willing to sign on board re: acting “fairly, ethically and honestly,” rather than simply writing: “Hey, we have a new policy called ‘not doing illegal shit.’ It’s a little unorthodox and it may not be for everyone, so please take some time to think it over.” Read more »

Like Deutsche Bank, management at BARC and CS think shrinking bonuses up to 20 percent sounds like a great idea. Read more »

I assume that there’s someone somewhere whose job it is to think about this, but the big Libor fine that appears to be in UBS’s future got me wondering: how do they decide how big these fines are supposed to be? In most fraud cases you can tot up how much someone stole and use that as a starting point, inflating or deflating it for different levels of evil or remorse. But that doesn’t seem to be a promising avenue in Liborgate, where the money involved is hard to calculate and mostly flowed around the manipulating banks without touching them directly. The fine-setters seem to have about four things to think about:

  • how much bad stuff did the bank do,
  • how much money did they make doing it,
  • how caught are they, and
  • how sorry are they now.

On how much bad stuff … really the point of these settlements is that you’ll never quite know. The Barclays settlement documents contain tons of delightful emails, but they’re framed by the usual prosecutorial boasting that they are “just some examples of the numerous trader requests over the years in question.” They’re a sampling thrown in for scandalous effect, not a real accounting of Barclays’ rate manipulation. For the CFTC to actually publish every instance that it discovered of rate-fixing, in a settlement, would be silly. For one thing, the settlement is designed to avoid the necessity of doing the work to get such an accounting. For another, the settlement is designed to avoid the public release of such an accounting, which would be ammunition for the private lawsuits that have sprung up around Libor.

So we’re unlikely to get a real official read on whether UBS was worse than Barclays and by how much. But the fine is obviously a clue that they were pretty bad. From David Merkel’s data they actually seem to have been middle-of-the-pack as a Libor submitter, without the extreme submissions and big swings that Barclays had. But to be fair that is in 3-month USD and part of UBS’s thing seems to have been manipulating Libor in more tenors and currencies than Barclays did. Read more »