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Banks Begin the Journey Back to Respectability

Andrew Marder
April 3, 2013

After Barclays (NYSE: BCS) received a $430 million fine last year for rigging the LIBOR, the bank decided to do some introspection. Management commissioned an internal investigation in to what went wrong, and what the bank could look out for in the future to avoid a relapse. In summary, "The culture that emerged tended to favor transactions over relationships, the short term over sustainability and financial over other business purposes." 

Making bank
The report concluded that pay was one of the main drivers of the risk-taking attitude that pervaded Barclays throughout the 2000s. During that period, Bob Diamond -- who would go on to become CEO -- was running the investment arm of the bank with a calculating genius that helped Barclays generate 23 billion pounds in revenue during 2007. At that time, the bank employed 140,000 people across the world. It shouldn't come as a surprise that the report faulted the bank for becoming "complex to manage." 

To sustain that size, traders in the investment bank had to make a lot of money. As a result, they expected to be paid large sums. So far, so good. The problem came when the equation reversed itself. Bankers were no longer being paid big bonu