LONDON - Be honest. Or be gone.
That's the message from the new chief executive at Barclays, the British bank that paid a $453 million fine for manipulating a key global interest rate. As he tried to put a brave face on 3,700 new job cuts and growing financial losses, CEO Anthony Jenkins said Tuesday that ethics matter as much as a given quarter's bottom line.
"Barclays is changing," Jenkins told reporters at a news conference in London. "There will be no going back to the old ways of doing things."
Jenkins has good reason to embrace the high road. Even though Barclays avoided a government bailout during the global financial crisis unlike British peers like Royal Bank of Scotland and Lloyds the lender has faced a string of scandals that are costing it billions of pounds.
Barclays was fined by regulators in the U.S. and Britain for manipulating the London interbank offered rate, or LIBOR, the benchmark for trillions of dollars in loans including some home mortgages. A slew of executives, including the brash American CEO, Bob Diamond, were forced to resign. Barclays and other British banks have been accused of mis-selling insurance and interest rate products to consumers and small businesses.
More recent scandals at rival banks have further shaken the financial industry.
Swiss bank UBS was fined $1.5 billion late last year for its role in the rate-rigging scandal. About a dozen other big banks, including Citigroup Inc. and JPMorgan Chase & Co. in the U.S., are under investigation for similar violations.
HSBC, another big London-based bank, faces fines of up to $1 billion after the U.S. Senate accused it of laundering Mexican drug money. In May, JPMorgan Chase disclosed a surprise $2 billion trading loss later upgraded to nearly $6 billion racked up by its London office. There were also allegations that U.K. bank Standard Chartered had spent years laundering Iranian oil money.
Jenkins signalled Barclays would focus on cleaning the bank's image and steering it clear of such scandals. He has announced a strategic review in light of the scandals and pledged to waive his bonus. On Tuesday, he said the bank has already taken steps to implement his words.
"It's not complicated," he told the BBC. "It's about recognizing that we're in business to serve our customers and clients, to deliver return for our shareholders. But also to be good for the societies where we do business, particularly Britain, where we are a major bank."
Barclays said Tuesday that it will close its structured capital markets unit, which sought to reduce the tax customers paid on their investments, cut bonuses and eliminate branch sales incentives. It will cut at least 1,800 positions in its corporate and investment banking unit and 1,900 retail and business banking jobs outside the U.K.
Barclays' commitment to mend its ways is not just about public image. It's about remaining a profitable business.
In fact, the bank's records show the scandals cost it dearly in 2012, pushing it to a loss of 236 million pounds ($368 million) compared with a net profit of 3.9 billion pounds in 2011. That was mainly because it set aside 2.45 billion pounds in provisions in 2012 to compensate clients to which it had mis-sold financial products.
Jenkins, who took over as CEO in August, said it would be years before "people changed their impression of us."
He issued a memo to his staff last month, outlining the bank's core values and declaring that living by those rules is every bit as critical as making money, arguing that there was no choice between integrity and profits.
"Unless we operate to the highest standards and our stakeholders trust us to behave with integrity, no business and certainly no financial institution can continue to be successful," Jenkins wrote. "Nor do they deserve to be."
Investors welcomed Barclays' restructuring of its operations, driving shares in the bank up 8.5 per cent on Tuesday.
Ishaq Siddiqi, a market strategist for ETX capital, said Jenkins was setting the right tone by first and foremost attempting to remove the taint of scandal a detox program for the 320-year-old bank.
"Investors, shareholders, politicians and the public alike will certainly welcome this memo by Jenkins, boosting confidence in the bank's visibility," Siddiqi said.
But why should stakeholders trust that Barclays will do what it is promising? Only a few years ago, Barclays issued a "citizenship report" that made many similar statements.
Kellie A. McElhaney, a professor of corporate sustainability at the Haas School of Business at UC Berkeley, said Jenkins' ideas make good business sense. At a time when trust in institutions is low and when people have seen corporate leaders hauled off in handcuffs the public is looking for leaders and brands it can believe in.
"Trust and corporate responsibility and contributing to society is the best way to differentiate yourself," she said.
McElhaney said success will depend on whether his leadership and employee actions back up his words. She's looking for metrics and a strategy.
"A company's responsible products and services are the only way to judge if a company is serious about its values and commitments," she said, "not just CEO's words."