Barclays new Chief Executive Antony Jenkins has highlighted restoring trust and reputation as a priority claiming that if the bank "serves customers and clients in a way that is socially useful, then we will rebuild that trust."
You get the reputation you deserve, because you are judged on what you say and do, with deeds being vastly more important than words. The actions of the worlds' biggest banks and their role in the crisis has created the reputation they now enjoy. Initially, Barclays appeared to be immune to the woes of the other banks and a friend to the British taxpayer. Their reputation stood fairly intact as those around them were tarnished. However, as it became apparent they sought to mislead us about the extent of their exposure by manipulating the interbank lending rate, the scale of their reputational issues were also revealed.
What does Antony Jenkins mean by socially useful? His comments were light on explanation from a bank mired in Libor and two mis-selling scandals. A month ago he highlighted interest only mortgages as the next potential mis-selling scandal and admitted that Barclays has a very large book of these loans.
Interest only mortgages were a symptom of the cheap money culture, helping create the illusion of prosperity that vanished in 2008. By actively selling loans to people without the means to repay the capital, the banks piled up liabilities until it became unsustainable and the resulting crisis wrecked the prospects for the customers whose savings, interest payments and investments supported them.
Although Barclays are shaking up their investment banking operation with a commitment to stop helping companies manage their finances in a way that avoids paying tax, making preparations for the possible fall out from their interest only mortgage book would be a positive move. They set aside £450m to cover interest rate swap miss-selling claims. How much will this cost their investors?
At its most basic level, what banks do is socially useful. They provide us with a means of managing our personal and business finances by using their products and drawing on their expertise. Literally, we trust them with our life savings. That trust has been sorely abused by banks who sought to hoodwink their customers and the regulators to drive ever greater profits. When Jenkins said "to some extent Barclays did lose sight of the customer and it's our job to put the customer back at the centre of everything that we do" he is just scratching the surface of the trust deficit in the banks.
Jenkins does appear to be aware of scale of the challenge he faces. Rebuilding trust, he says, is "done through what we do, not what we say, by serving customers every day in a fair and transparent way." Now prove it.
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