LONDON: British bank Barclays is to close a profitable but controversial tax advisory business, it said on Sunday, as part of an attempt by its new chief executive to clean up the bank’s image.
Antony Jenkins will say on Tuesday the bank is closing the Structured Capital Markets (SCM) business unit, the bank said. He had already indicated it would go or be scaled back as he ends activities that could cause reputational damage.
“The old ways weren’t the right way to behave nor did they deliver the right results - for banks themselves or for wider society ... banks that fail to change will become failing banks,” Jenkins says in the draft of a speech due to be delivered on Tuesday laying out his future strategy.
Extracts of the text were provided by the bank on Sunday.
SCM has long been controversial, but has delivered hundreds of million of pounds in profits.
Nigel Lawson, the former Conservative finance minister and member of a current parliamentary banking inquiry said last week lawmakers had been told privately that SCM made annual profits in the “high hundreds of millions” of pounds and sometimes 1 billion. But Barclays chairman David Walker told him the scale of the business was “much smaller than suggested”.
Jenkins is expected to say on Tuesday that many of the bank’s tax services are not controversial and it will continue those.
“However, there are some areas that relied on sophisticated and complex structures, where transactions were carried out with the primary objective of accessing the tax benefits,” he is quoted as saying.
Although these transactions were legal, they are incompatible with new tax principles which the bank will publish, he says.
Jenkins is also expected on Tuesday to unveil plans to boost profitability by cutting some operations and slashing costs, which could see 2,000 investment bank jobs axed. A large part of his speech is expected to be about improving standards and culture after a series of scandals at the bank. Reuters