More than 15 years ago an ambitious transnational corporate alliance was completed when British bank Barclays acquired control of SA’s Absa. That deal, a foreign direct investment of R33bn, was seen as a vote of confidence in SA’s capital markets and the highly regulated banking sector in particular.
The merits of the deal were easy to digest. By owning Absa Barclays would be able to spread its wings into the African continent. On the other hand Absa, facing stiff competition in its domestic market, would be able to leverage the financial muscle of the Barclays brand to widen its footprint.
Neither party — not any other in the financial sector — could have foreseen the financial crisis that hit in 2008 and turned the entire world of finance on its head. While that was an exogenous force both Barclays and Absa simply had to learn to live with, they also somehow managed to create internal crises of their own.
Barclays has an extraordinary history of complicated executive exits and reshuffles. The man who masterminded the Absa deal, John Varley, exited the bank in 2012 but became the target of an investigation that led to fraud allegations relating to the capital raising at the height of the financial crisis that helped the bank avoid a state bailout.
His successor, the swashbuckling Bob Diamond, was elevated to the CEO job even though the chief regulator, Bank of England head Mervyn King, harboured anxieties about him. As it turned out, the regulator didn’t have to wait long for these to manifest as the era saw the bank fined over the Libor rigging scandal, which forced Diamond to resign.
Unfortunately for the bank his successor, Antony Jenkins, did not last long either; he was fired by the board for the crime of daring to restrain the ambitions of the investment banking unit. His replacement, Jes Staley, managed to get fined £640,000 for breaking the bank’s rules relating to whistleblower protection. While Staley survived that scandal, this week he resigned on the back of another scandal — his friendship with the late paedophile Jeffrey Epstein.
This scandal has become an illustration of the perils of association. For many of Epstein’s friends and associates the question of awareness rather than complicity in Epstein’s activities has been enough to warrant serious questions being asked about their judgment. For those in prominent public roles, the inability to disentangle themselves from the questions that will linger on until at least the trial of his girlfriend, Ghislaine Maxwell, forces them to consider whether they can maintain their public roles.
For Britain’s Prince Andrew, given the public stature of the British royal family and the accusations against him, the scandal has forced a withdrawal from public life. Staley’s ousting from Barclays indicates that issues of perception are still a key consideration in the regulated world of banking.
In the same period, Barclays’ former subsidiary Absa has found itself dealing with a reputation crisis of its own emanating from the question of choosing a new chairperson. Sipho Pityana, the lead independent director, has been rejected as a nominee by the banking regulator, apparently on the basis of sexual misconduct allegations laid against him when he was AngloGold Ashanti chair. That rejection has led to litigation that seeks to declare the conduct of the regulator to be illegal.
The problem with the world of banking is that the public interest considerations are so important in building public confidence in the sector that a mere association with scandal — as seen in the Staley case — is enough to make the regulators anxious. In Pityana’s case we are dealing not with association but direct complicity in a matter that should never be swept under the carpet.
The idea that a regulator would overlook that and still rubber stamp his nomination would be a departure from what regulators of recent times have had to do, and something regulators definitely need to do, especially when sexual misconduct is the issue.
• Sithole (@coruscakhaya) is an accountant, academic and activist.
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