Bloomberg: Banking is getting boring and that is a good thing

Published May 1, 2014 6:41 am
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By Mark Gilbert

Bloomberg View

Speak to any financial regulator and they will tell you that their post-economic crisis ambition is for banking to become boring. Events at Barclays suggest they're starting to get their way.

Hugh 'Skip' McGee, the bank's top-paid executive, said on Tuesday he will quit at the end of the month as chief executive officer of the Americas division at Barclays because his job has changed, saying:

"My focus has always been on clients, but given the need for Barclays leadership to focus on regulatory issues for the foreseeable future, I have decided that it is time for me to move on to new challenges."

The shift in culture comes from the top of the firm; Antony Jenkins, who took over as Barclays CEO in August 2012, came from the bank's retail banking division, in contrast to his predecessor, Bob Diamond, who earned his stripes as a bond trader at Credit Suisse and Morgan Stanley. Barclays is setting up a "bad bank" to absorb some of the businesses it no longer wants to be involved in, including commodities, as it shrinks its investment-banking activities.

McGee's 8.87 million-pound ($14.9 million) stock bonus, disclosed in March, was the highest for any executive at Barclays. Jenkins earned less than half as much, with shares valued at 3.82 million pounds.

Alison Williams, an analyst at Bloomberg Industries, notes that Deutsche Bank cut its investment bank front office staff — the folk who buy and sell stuff in markets — by 2 percent in the first three months of this year, even as total staff for the unit grew 1 percent from the fourth quarter.

Instead, Germany's biggest bank is increasing head count in compliance and related functions, and adding "several hundred" supervisory staff including about 150 in its investment bank, Williams said in a report. Her figures also show Credit Suisse trimmed its traders by 2.5 percent, adding to cuts of 1.5 percent by the end of last year, with Goldman Sachs and JPMorgan also shedding staff.

As regulators constrain so-called proprietary trading, where banks gamble with their own money, and demand higher capital standards, some areas of finance are shrinking. Consider the world's biggest market, foreign exchange. Currency trading declined to $4.87 trillion in December compared with $5.7 trillion in June, according to data from CLS Bank, which operates the world's largest foreign-exchange settlement system.

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