The Financial Times’ Lucy Kellaway is not only a witty writer; she also is a superb barometer. Her latest column is a classic. It’s about the unstoppable rise of ‘chumminess’, that insincere over-familiarity from total strangers which now corrupts all encounters. Like fat food and unscrupulousness – or maybe unscrupulous fat food – it’s basically a US disease that has spread faster than Spanish influenza and is twice as insidious. Overlay the essentials of business relationships – which boil down to buying and selling – with a thin veneer of scripted ‘niceness’ and hey presto! The mug buys.
Just as voters are cynically weary of established parties trotting out clichéd balderdash, customers are now indifferent to blandishments of sincerity. The sincere advertisement, the sincere corporate statement, the sincere protestation of fair treatment – how many of these do we daily trip over, find irritating, and shrug aside as worthless?
Contrast that with authenticity. While sincerity can be pledged – “I really am doing the right thing” – authenticity can’t. While sincerity is short-term, dispensable, and flighty, authenticity is long-term, solid and – critically – it’s a quality that is dependent on external validation. You can’t claim authenticity – you can only earn it. And that takes years. Meanwhile expressions of sincere regret and public avowals – ‘next time will be different’ – are ubiquitous. And like something that’s everywhere, they are cheap and worthless.
How does this relate to financial markets?
Let’s juxtapose two events. Both concern Barclays but a similar point might be made about any number of big, uncontrollable banks.
The first comes from 17 January 2013. That day Antony Jenkins, the boss of Barclays, sent to all staff a memo setting out his sincerity-stall. Out with the old entitlement culture, in with the new ‘do the right thing’ approach. Jenkins then said: “There might be some who don’t feel they can fully buy in to an approach which so squarely links performance to the upholding of our values. My message to these people is simple. Barclays is not the place for you, the rules have changed.” Six months before Marcus Agius, then Barclays’ chairman, sincerely and publicly apologised for his bank’s egregious behaviour: “We are truly sorry for what has happened and that you have been let down.” No longer would relatively poorly-paid staff be dependent for their bonuses on selling dubious products, such as payment protection insurance, or interest rate swaps, to ill-informed customers.
Fast-forward to last week. On 23 May the Financial Conduct Authority (FCA) fined Barclays £26 million – that’s 1% of the £2.4 billion in bonuses paid to bank staff in 2013, itself a rise of 10% over the previous year – for manipulating the London gold ‘fix’, the twice-daily setting of the price of gold that has been a cornerstone of the gold market since 1919. The FCA also fined Daniel James Plunkett, then a director on Barclays’ precious metals desk, and who was paid almost £300,000 a year, £95,600, and banned him from any future significant role in the City.
For all I know, Plunkett was merely following orders, or at least doing what he could to boost the bank’s profits. Plunkett’s ‘achievement’ on 28 June 2012 was to artificially lower the likely gold price, thus preventing Barclays from having to pay a customer £2.3 million and boosting Plunkett’s own trading profit by £1 million. The customer has reportedly been repaid. Jenkins again, commenting on this latest breach of trust: “We very much regret the situation that has led to this settlement.”
The gold ‘fix’ – an unfortunate name for a previously venerable tradition – is now certain to go the way of the silver ‘fix’. It will become extinct. The chairman of the gold ‘fix’ opens proceedings by stating a price to the other members, which are now just four big banks – Barclays, HSBC, Société Générale and Scotia. Deutsche Bank recently left. Now it might be thought that just four banks determining the gold price for that day is a bit iffy anyway; but each one of these banks plays a major role in global gold trading, and in theory customers – buyers and sellers – are in constant communication with traders responsible for setting the price while the ‘fix’ goes on. Buyers and sellers were matched, they thought fairly. People trusted it; it was a globally quoted benchmark.
No longer. The setting of the gold price will be driven into a host of different and possibly over-lapping murky corners. The destruction of trust in a previously respected City institution will result in the widespread distrust of a now utterly splintered gold market. Who can be sure that Plunkett’s fall from grace was a one-off incident? Who can be sure that he was not indeed quietly and surreptitiously encouraged by more senior Barclays’ officials to trade in this way? The settlement that Barclays reached with the FCA is only superficially transparent. The FCA found that Barclays did not have any systems in place to record orders by traders during the gold fix until February 2013. The implication is that many more ‘Plunketts’ could simply have escaped notice.
No doubt Antony Jenkins was being equally sincere in his comment on the plunge of Plunkett. The trouble is his words – any words, at this lamentable point in the history of the big banks – lack authenticity. Barclay’s latest ad campaign has the terrifically sincere message “Your Bank. We’re Listening.” And performance reviews for Barclays’ staff now depend in part on how well they exhibit the “right values and behaviours”. But these kinds of internal programmes are little more than a tick-boxing activity, with the veiled threat of career extinction if the right boxes don’t get ticked. As a friend at Deutsche Bank put it to me the other day, “we’re no longer a bank. We’re a litigation firm with a bank bolted onto it.” Everyone knows how to mouth sincerity; but how to do business authentically?