Dear,
Some weeks ago it was announced that Barclays was going to reduce significantly its Investment Banking division and firing 7500 employees.
http://www.bloomberg.com/news/2014-04-23/barclays-may-cut-7-500-at-investment-bank-bernstein-says.html
Furthermore, the bank also announced that the new bank´s strategy will bring a workforce reduction of 19000 employees by 2016
http://www.theguardian.com/business/2014/may/08/barclays-to-cut-19000-jobs-scale-back-investment-bank-antony-jenkins
We also read that the Bank will park 90 billion Euros worth of risk-weighted assets from the investment bank in a bad bank.
http://www.reuters.com/article/2014/05/08/barclays-restructuring-idUSL6N0NU1LJ20140508
And finally, Barclays Chief Executive Officer of the Americas division and top-paid executive, Hugh McGee resigned some weeks ago because the bank´s focus is going to be regulation.
“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”
http://dealbook.nytimes.com/2014/04/29/head-of-barclays-u-s-business-to-step-down/?_php=true&_type=blogs&_r=0
For understanding the recent events, we have to look at Barclays recent history.
On September 2008, Barclays tried to purchase the investment-banking and trading divisions of Lehman Brothers, but the acquisition was not approved by the British regulatory authorities.
As you know, Lehman filed for bankruptcy on September 15, 2008.
On September 20, 2008 Barclays acquired the core business of Lehman Brothers with the approval of US Bankruptcy Court, becoming a top player, in the selected club of Wall Street´s investment banks.
After 2008 financial crisis, following the governments rescue packages and central banks liquidity injections, results looked very positive for investment banks, including Barclays.
http://online.wsj.com/news/articles/SB10001424052748703581204576033514054189044
But unfortunately, this was never a conjunctural crisis, as others that the capitalistic suffered periodically on the 20th century.
This is a systemic crisis and is forcing a systemic change of the financial system.
Last year's Barclays' strategy has been making the bank growing, increasing its size and volume.
At the same time, the bank increased its Risk Weighted Assets and consumed Capital.
In the old model this would have been a successful strategy, but this is not the case anymore.
In the new model, a successful strategy must not target volume, but efficient capital management, this is the painful lesson that Barclays is learning today.
When Barclays executives decide to park 90 billion Euros in a bad bank (400 billion pounds on the next 3 years), they´re trying to reduce the capital consumed by those assets.
They know that capital is scarce and it will be more scarce in the next future. Consequently, reducing capital consumption becomes Barclays top priority.
Some days ago, I discussed about this with a good friend, who has an executive position in a middle size bank; he told me that the scenario is scary.
I agree, systemic changes can be scary; but they also come with opportunities.
SAP Banking is very well positioned to support banks transformation, according to the new challenges of the systemic change.
I´ve personally worked in the design of a Capital Optimization model, supported by Bank Analyzer technology, that will offer an answer to some of the challenges of the new financial system.
Scary? Maybe
Pessimistic? Never
Looking forward to read your opinions.
Kindest Regards,
Ferran.
Some weeks ago it was announced that Barclays was going to reduce significantly its Investment Banking division and firing 7500 employees.
http://www.bloomberg.com/news/2014-04-23/barclays-may-cut-7-500-at-investment-bank-bernstein-says.html
Furthermore, the bank also announced that the new bank´s strategy will bring a workforce reduction of 19000 employees by 2016
http://www.theguardian.com/business/2014/may/08/barclays-to-cut-19000-jobs-scale-back-investment-bank-antony-jenkins
We also read that the Bank will park 90 billion Euros worth of risk-weighted assets from the investment bank in a bad bank.
http://www.reuters.com/article/2014/05/08/barclays-restructuring-idUSL6N0NU1LJ20140508
And finally, Barclays Chief Executive Officer of the Americas division and top-paid executive, Hugh McGee resigned some weeks ago because the bank´s focus is going to be regulation.
“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”
http://dealbook.nytimes.com/2014/04/29/head-of-barclays-u-s-business-to-step-down/?_php=true&_type=blogs&_r=0
For understanding the recent events, we have to look at Barclays recent history.
On September 2008, Barclays tried to purchase the investment-banking and trading divisions of Lehman Brothers, but the acquisition was not approved by the British regulatory authorities.
As you know, Lehman filed for bankruptcy on September 15, 2008.
On September 20, 2008 Barclays acquired the core business of Lehman Brothers with the approval of US Bankruptcy Court, becoming a top player, in the selected club of Wall Street´s investment banks.
After 2008 financial crisis, following the governments rescue packages and central banks liquidity injections, results looked very positive for investment banks, including Barclays.
http://online.wsj.com/news/articles/SB10001424052748703581204576033514054189044
But unfortunately, this was never a conjunctural crisis, as others that the capitalistic suffered periodically on the 20th century.
This is a systemic crisis and is forcing a systemic change of the financial system.
Last year's Barclays' strategy has been making the bank growing, increasing its size and volume.
At the same time, the bank increased its Risk Weighted Assets and consumed Capital.
In the old model this would have been a successful strategy, but this is not the case anymore.
In the new model, a successful strategy must not target volume, but efficient capital management, this is the painful lesson that Barclays is learning today.
When Barclays executives decide to park 90 billion Euros in a bad bank (400 billion pounds on the next 3 years), they´re trying to reduce the capital consumed by those assets.
They know that capital is scarce and it will be more scarce in the next future. Consequently, reducing capital consumption becomes Barclays top priority.
Some days ago, I discussed about this with a good friend, who has an executive position in a middle size bank; he told me that the scenario is scary.
I agree, systemic changes can be scary; but they also come with opportunities.
SAP Banking is very well positioned to support banks transformation, according to the new challenges of the systemic change.
I´ve personally worked in the design of a Capital Optimization model, supported by Bank Analyzer technology, that will offer an answer to some of the challenges of the new financial system.
Scary? Maybe
Pessimistic? Never
Looking forward to read your opinions.
Kindest Regards,
Ferran.
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