Barclays business feels pain of rate fixing scandal - Reuters Barclays business feels pain of rate fixing scandal - Reuters

Saturday, July 14, 2012

Barclays business feels pain of rate fixing scandal - Reuters

Barclays business feels pain of rate fixing scandal - Reuters

LONDON, July 13 | Fri Jul 13, 2012 11:08am EDT

LONDON, July 13 (Reuters) - Barclays Plc is already counting the cost of lost business over its part in rigging a global interest rate and may be spared a worse exodus of customers only because the cloud of scandal hangs over other banks too.

So far, Barclays is the only bank to admit a role in manipulating the London interbank offered rate, Libor, which sets a benchmark for interest rates on everything from mortgages to credit cards and over $550 trillion in financial derivatives.

Britain's third biggest bank was dropped from a Japanese bond deal this week. Meanwhile, the council in the central English city of Leicester said it was pulling out 6 million pounds ($9 million) in deposits.

"We share in the anger expressed by many customers by the recent scandal," said Rory Palmer, deputy mayor of Leicester, in a statement provided to Reuters. "We will not be investing in Barclays in the foreseeable future."

The Japan Bank for International Cooperation left Barclays out of a deal which could have reached $1 billion in bond sales, having named the bank in May as one of three assisting. It would have earned hefty fees.

A banker with knowledge of the process said Barclays was dropped due to reputational and counterparty risk issues. "Clients are more sensitive to this stuff now," he told IFR, a Reuters publication.

Mark Bamford, Barclays head of global fixed income syndicate, said it was business as usual for the firm.

"We remain focused on executing for clients and competing for their business every day, and our pipeline of deals continues to be very strong," he said.

The bank declined further comment.

The scandal has forced out the bank's chairman and chief executive and sparked a political row in Britain. It has also prompted talk of Barclays scaling back its investment bank, which had grown into the world's seventh biggest.

There was no clear estimate of the total impact on business at Barclays since the scandal broke.


The loss of the deposits from Leicester, a city of around 300,000 people, was a pinprick compared to the cost even of the $450 million Barclays has been fined in Britain and the United States for helping rig Libor.

But the account would not be the last that Barclays lost over the scandal, said analysts from Italian investment bank Mediobanca in their daily research note on developments in the financial industry.

"The question is the scale of the outflows and the concern that corporate clients will start to follow," said the note, which goes to the bank's investment customers.

"The only good news is that many of Barclays' competitors are also being investigated. The winners may be Goldman Sachs and Morgan Stanley who are not involved in the scandal."

U.S. investment banks Goldman Sachs and Morgan Stanley are not among the mainly commercial banks which provide Libor levels, but compete with many of them for investment banking business.

Both Goldman Sachs and Morgan Stanley declined to comment on any possible impact.

More than a dozen other banks are already being probed as part of the worldwide scrutiny, including UBS, Deutsche Bank and Royal Bank of Scotland, all of which have said they are cooperating with investigators.

The backlash faced by Barclays could deter others from co-operating. A complex legal process means it could take many more months for other settlements or fines to land, bankers and analysts said.

Rivals were on the lookout to snap up business, but a corporate broker at one rival firm said he expected Barclays' clients to wait to see how things develop given the likelihood more banks will be drawn in.

The broker said that although few banks could be totally free of regulatory issues, the current environment could make it harder for Barclays to pitch for business.

"If someone were thinking of appointing Barclays as a broker, that would be a brave announcement at the moment," he said.

Libor is compiled from estimates by large international banks of how much they believe they have to pay to borrow from each other.

The rates submitted by banks are compiled by Thomson Reuters , parent company of Reuters, on behalf of the British Bankers' Association.

We need new leadership for sustainable business, society and the world - The Guardian

We are living through an unprecedented period of economic crisis, one where ecological sustainability now needs to be seen in the context of economic and social sustainability. This requires a new way of thinking about and doing business that makes sustainability its core principle if we are to manage our way successfully out of the current situation.

The key problem in effectively embedding environmental sustainability into business is that business leaders need to break out of a prevailing mindset where nature is viewed as little more than a means to an end.

Similarly, the financial and ensuing economic and societal crises will only be resolved when business leaders, politicians, and the economists whose ideas they draw on recognise that we can no longer continue to use economic resources and ideas as a means to furthering the interests of a few at the expense of the many.

Just as we have become alienated from nature and need to discover a new way of looking at the natural world, we now require a paradigm shift in the values and beliefs that underpin current management thinking, not least to counter the growing alienation that so many feel from the apparent aims of business.

A new type of leadership is needed to do this, one that recognises organisations as living systems. The roots of our current problems go back to how capitalism has embedded a mechanistic mindset into business where the focus is on efficient management and control of nature.

The outcome has been the exploitation of nature beyond its limits. The same imbalance now applies more generally to the economy. What has been lost in this is the idea of the stewardship necessary for a sustainable ecology of business and of nature. This requires a narrative of community and shared value rather than one of market fundamentalism and the pursuit of individual self-interest rather than mutual benefit.

More enlightened business leaders such as Paul Polman of Unilever argue the need for a more collaborative and sustainable form of capitalism that does not over-leverage our natural or our societal resources. Small business leaders such as Nick Brown of Nikwax and Páramo Clothing have built businesses out of high performing products that are ethically and environmentally friendly, championing a sustainable approach to business and living.

In the public sector the Department of Energy and Climate Change pilots programs such as the Low Carbon Community Challenge that seeks to develop our understanding of how practices embedded in local communities, working with public and private sector partners, can help the transition to a low carbon economy.

At Davos meetings of the World Economic Forum, world leaders discuss the growing necessity of aligning effective business with a healthy economy and a healthy society, the need to develop business processes that are economically competitive, socially responsible, in balance with nature, evidence that a growing concern of at least some business leaders is to think again about interconnectedness and interdependence.

This suggests that we may be moving slowly but surely towards a different narrative of business, one that is less dependent on the mechanistic one-dimensional language of economics, more humane, more organic, biological and evolutionary.

Muhammud Yunus, himself an economist, suggests that his fellow economists have failed to understand human nature in all its complexity. An overemphasis in the modern science of economics on objectivity and measurement has dulled our sense of the importance of the fragile interdependences that make human relationships and our relationship with nature sustainable. Policy makers discuss whether GDP is an adequate measure of economy and society and debate how we can develop measures of national wellbeing.

Language is important. A new narrative of business, of society and of capitalism is essential. The challenge for business schools, a key site of management education for future business leaders, is to contribute to this new narrative and to be a catalyst for the paradigm shift in values and beliefs that will be necessary to lay the foundations for a sustainable future.

We have focused too much on efficiency and the control of nature and this has helped alienate us from nature and, to the extent that it is linked to a harsh Darwinian view of nature red in tooth and claw, has also fostered a selfish individualism that has alienated us from each other.

The poet T.S. Eliot asked, "Where is the life we have lost in living?" It is a question whose time has come. The challenge for business leaders is to justify their role in creating a living system of economy, society and nature to give us hope for the future.

Ken Starkey is professor of management and organisational learning and head of management division at Nottingham University Business School

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