Exclusive: Barclays' board just secretly signed off on a huge restructuring of a key business line

Barclays’s board just signed off on a radical restructure of its personal and corporate banking business as it prepares for the arrival of a new CEO and tough rules forcing it to split its retail and risk-taking investment banking division.

A person familiar with the matter told Business Insider the bank’s board approved a plan to split its corporate banking arm into three separate parts.

  • Small companies: The small-to-medium companies banking arm will go into Barclays’ “ring-fenced bank,” which will house retail banking once new rules on bank structure are in force in 2019.
  • Mid-market companies: will go outside the ring-fenced bank to be housed in the part of the business that includes investment banking.
  • Large companies: will also be outside the ring-fenced bank, but be separate from the mid-market segment.

The sign-off happened last week. The move was in response to tough rules forcing UK banks to split their deposit-taking, retail arms and risk-taking investment banking division to make them less likely to need government bailouts in a crisis.

Personal and corporate banking is one of five key business lines at the bank, along with Barclaycard, the investment bank, Africa banking and the non-core division, which holds the bank’s toxic assets.

Business Insider asked Barclays for a response on the specific details and the bank e-mailed the following statement:

Barclays has not yet finalised its structural reform plan. Respecting the regulatory process, we have not, and will not, publicly discuss our plan for structural reform until it is formally approved. However we can be clear that any plan we submit for approval will be wholly consistent with both the legal requirements and objectives of ring fencing.”

The move is very much in line with the evolving direction of the bank and paves the way for Barclays to merge its big corporate business line and its investment bank, which would boost the bank’s risk-taking division as it prepares for a shift in management.

Former CEO Antony Jenkins, ousted in July, will be replaced by Jes Staley — a hedge fund manager at the US-based BlueMountain Capital and former CEO of JPMorgan’s investment-banking and asset-management unit.

Staley is the opposite of Jenkins. While Jenkins came from the Barclays retail business, Staley oversaw JP Morgan’s expansion into alternative investments. Staley will receive an annual salary of £1.2 million ($US1.8 million) and an extra £1.15 million ($US1.7 million) delivered in shares as part of role-based pay.

“Jenkins’ focus was trying to get us to tread water with less resources. I’m looking forward to Jes injecting some enthusiasm and drive back into the investment banking,” said a Barclays staff member working in trading operations to Business Insider.

When nominated as CEO, Staley made returning money to shareholders a big focus of his approach to leading the bank — a big switch from Jenkins’ mandate of focusing on retail customers and cultural reform. Here’s an excerpt from Staley’s statement (emphasis ours):

We must also continue the focus on shareholder returns which John McFarlane has mandated. Barclays is a very valuable franchise: from its retail and commercial banking presence in the UK, its strength in cards and payments, its strong position in Africa, to its Investment Bank. Maximising the potential of this franchise means building on our competitive advantages and developing new ones in order to generate strong returns on capital. If we do this, increased value for our shareholders will follow at the same time as Barclays’ long history of leadership is continued and enhanced.

Barclays’ new direction has shaken up the markets somewhat, but investment banking staff inside the bank have only had positive things to say about Staley’s appointment and what it could represent.

Another Barclays investment banker told Business Insider: “I’m excited about the direction and focuses outlined by Staley — it seems like he could be the person to inject the energy needed into the bank (particularly in the investment banking arm) in order to bring success again whilst being mindful of the mistakes of the past.”

Staley reiterated the points in a memo to staff on Wednesday. Here are some excerpts obtained by Business Insider:

“We will complete the necessary transformation and repositioning of the Investment Bank to a less capital intensive model. And we will support the growth of our world leading payments business in Barclaycard.

“We are a commercial enterprise and must generate attractive returns for our shareholders. They have been patient and now we must deliver for them. We have the means and assets to get there, and I am optimistic for our prospects.”

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