The prospect of an American investment banker being appointed to run Barclays has sparked a warning that policymakers should not cave into industry pressure to water down new rules introduced since the 2008 crisis.
Amid expectations that Barclays is lining up Jes Staley, formerly at JP Morgan, to take its helm, a leading MP said it was crucial that rules requiring a ringfence between high street and investment banking arms were implemented.
“Any expansion of the investment bank would increase the importance of ensuring the ringfence is rigorously applied,” said Andrew Tyrie, the Conservative MP who chairs the Treasury select committee. The separation was recommended by the Independent Commission on Banking, chaired by Sir John Vickers, and must be implemented by 2019.
Uncertainty about the implications of a veteran investment banker taking charge of Barclays sparked a fall in its shares, which closed 2% lower on Tuesday.
Staley – who currently runs the BlueMountain hedge fund – is the frontrunner to replace Antony Jenkins, who was ousted in July after three years battling to restore the bank’s reputation in the wake of the Libor rigging crisis.
Barclays is still in negotiations over his recruitment, only saying that “the process of appointing a new group chief executive officer has not yet concluded and Barclays will provide a further update once that is complete”.
But expectations of his appointment sparked speculation his focus would be on the investment banking arm built up under Bob Diamond, the US banker who was ousted during the Libor scandal, and signal a return to the ostentatious style of banking that has been frowned on since the 2008 crisis.
Russ Mould, investment director at stockbroker AJ Bell, said: “Investment banks are generally a good business for employees and a bad one for shareholders, rather like football clubs. Investors tend to attribute a low valuation to them, as they are volatile, cyclical, soak up a lot of regulatory capital and come with high wage bills.”
Jenkins had put 14,000 jobs on the line, including 7,000 in the investment bank, which was being positioned away from traditional area of expertise in fixed income, currencies and commodities and more towards advising big corporate customers.
It is the second time Staley has been been tipped for the Barclays role. He was linked to the job when Diamond left, before Jenkins was promoted from running the retail bank. Jenkins was regarded as safer choice and avoided controversy over a potential pay deal for Staley that could have run to tens of millions of pounds.
Assuming he is appointed, he would also be joining the ranks of ex-JP Morgan officials at the top of British banking. The Barclays finance director, Tushar Morzaria, was hired in 2013 from the US bank and awarded £3.2m shares to buy him out of his bonuses. Bill Winters - who Staley replaced as the boss of JP Morgan’s investment bank - is now running Standard Chartered and received more than £6m of shares to buy him out of the hedge fund he joined after leaving JP Morgan.
The timing of any appointment is unclear as the Bank of England’s regulation arm would need to approve his role and has not yet done so.
While not well known in the UK, Staley spent more than 30 years at JP Morgan Staley and was regarded as the likely successor to Jamie Dimon. But in 2013- when JP Morgan was trying to recover from the London Whale trading incident, - he left to join Blue Mountain.
He is known to be a keen sailor, and has a custom-made 90ft yacht Bequia, named after the Caribbean island where he honeymooned with his wife Debbie.
Sandy Chen, analyst at the broker Cenkos, said it could be an opportunity to restructure Barclays. “We think an option worth considering – which we’ve advocated in the past – would be formally carving out the investment bank and moving it to the US. Of course, it would have to be cleaned up and maybe recapitalised along the way – but this is what those investment bankers are good at. This, we think, would probably please the regulators on both sides of the pond – and it would then make those sum-of-the-parts valuations for Barclays more worthwhile.”
This article was written by Jill Treanor, for theguardian.com on Tuesday 13th October 2015 12.18 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010