Bob Diamond was our rudder of stability in very rough waters. He built Barclays Capital from almost nothing after he and his team carefully appraised in 1997 that it would cost £8m a year for 10 years to turn the equity and M&A divisions of Barclays BZW around. Having sold off these businesses to Credit Suisse, BarCap started out as a niche debt raising and trading house. By 2012 it was a top 3 investment bank in debt, FX and commodities. And it was a major player in M&A and equities. The employees of BarCap, and to an extent Barclays as a whole, owe a lot of their success to Diamond’s leadership. Many others attempted to chart that course and failed.
There is a deep sense of shock within BarCap at Diamond’s resignation. Why is Barclays being penalised (with the loss of the CEO, not the fine) when it acted as the whistleblower to LIBOR malpractice? Other banks, guilty of the same behaviour, were recalcitrant. Maybe the politicians are spiteful at Barclays' success? Had they been able to part nationalise Barclays, they could have tamed the beast. Have politicians really thought about what they've started? Diamond’s exit and regulator settlement opens the prospect of further regulatory settlements and criminal charges for the others banks – and a wave for further board resignations. This is not the best time for a systemic change of leadership when Europe is in a chronic debt situation.
Longer-term, people are worried about the replacement for Diamond. He was vociferous and strong in leadership. Rich Ricci has more charisma than Diamond’s right hand man Jerry Del Missier, but Rich Ricci has been dealt a weak hand. It will be hard for him to stand up to a new Barclays CEO and fight the investment bank’s corner.
This all trickles down to pay. If the top guy’s not going to get paid – how am I? It looks like pay with either slowly decline or the investment bank will be potentially spun off and will suffer worse funding rates further deteriorating the chance of achieving tough returns on equity.
The author worked at Barclays Capital until very recently and has written this based on conversations with several ex-colleagues still at the bank. If you still work at BarCap and want to express your opinion about this week's events, email us at Editor@eFinancialCareers.