Barclay’s Chief Executive, John Varley, has been brilliant on Sky TV, the BBC Radio 4’s Today programme (and later this week on Panorama). Not a moment before time, we have a senior current banking figure not only talking (that’s very rare) but talking like a human being.
He apologised properly, shouldering responsibility for his industry’s role in creating the recession. He was realistic about the future. He set absolutely the right tone and communicated some tough messages.
Asked by Sky TV’s Jeff Randall (see the video below) whether he agreed with Nobel Peace Prize winner Paul Krugman that the financial collapse seems certain to turn a run of the mill recession into something much worse, Varley replied:
Oh, yes, there’s no doubt about that. If you look at the players who were involved in what’s happened to the world, I think there were quite a lot of players involved. They would include central banks, they would include governments. But they would certainly include the banks. And the banks have to be prepared to have the humility to acknowledge that and accept it, and to say sorry. It is important that the industry is in that space. Partly because they need to take their share of their responsibility; we need to take our share of the responsibility as an industry. And partly also because banks need to be at the table when the reconstruction and the remediation is discussed and agreed.
On the Today programme (listen again on their BBC website page for 20 December, 2008) Varley forthrightly admitted that some of this is a PR matter. The banks need to rebuild their reputations. He seemed effortlessly to understand this was a moment when messages matter. It may be that Varley is in especially good shape to speak both humbly and robustly because he hasn’t yet taken the tax-payer’s shilling. So he accepts some of the blame for this mess but is in the relatively attractive position of wanting to dig himself out of the hole by himself.
A PR professional is bound to ask whether Varley was tutored in his messaging and its style, or is a natural. Who cares? He got there. No-one else at his level, or anywhere near it, has been as good, or anywhere near it.
It is worth reprising some of his messages:
- Last ten years were an anomaly rather than normalcy.
- Explosion in price of assets as a result of the easy availability of money.
- Loan to value ratios in British houses, available at 100%, 115% or 125% of the value of a house: “looking back on it, madness”.
- Unemployment rising to 7.5% of the course of the next 12 months, with unemployment in the UK reaching 2.5 million by the end of 2009.
- Negative house price inflation, still has another 10% to 15% between now and the end of next year.
- Many customers struggling with the slowdown in the economy, and our obligation is to be as supportive as we can.
- Barclays and the big banks are open for business.
How can the answer be yet more cheap debt, lower interest rates, surely that cannot be the solution?
What the economies around the world need is a burst of stimulus. It is perfectly clear to me that within that package there needs to be, and there are now, lower interest rates. For millions of our customers as a result of the cut in base rate; millions of our mortgage customers, millions of small and medium-sized enterprise customers are now getting the benefit of lower monthly debt service costs. That is, I think, a good thing as they struggle through the economic slowdown of the next 12 months or so. But if you ask me should we have perennially low interest rates, absolutely not.
I think you could say that one of the big drivers of this crisis has been easy money made available by central banks around the world over the course of the last seven years. It has absolutely been a catalyst of the crisis. So I accept that point. Getting the balance right is not easy. But that’s what – frankly – governments, and central banks, and indeed commercial banks like this bank have to get right.
Commenting on his bank’s struggle to maintain his bank’s independence he says:
- From the point of view of shareholders there is a significant advantage to independence.
- If British taxpayers’ money is deployed in a bank a big part of the agenda of that bank has to be directed at the UK.
- But Barclays is more than a UK bank – it employs more people outside the UK and has more customers outside the UK.
- It is important that growth outside of the UK is unimpaired.
- What you want is alignment between your shareholders. The commercial interests of shareholders need to be aligned.
- There is a significant difference – candidly, in the context of alignment – between taking UK government money, which has to carry some social agenda with it.
- Compare that with the commercial interests of the sovereign wealth funds who have invested in Barclays. There is complete alignment between the interests of those sovereign funds and the interests of our institutional and personal shareholders.