Barclays needs to rein in pay for top staff and tighten control of its operations to repair its reputation after a string of scandals, a report commissioned by the lender said on Wednesday.
In what Britain's second largest bank described as "uncomfortable reading", the review said the group's rapid transformation from domestic retail lender to global universal bank created a sprawling set of businesses with their own culture and an emphasis on profit, sometimes at all costs.
Investment banking leaders were ambiguous about right and wrong, the report said.
"There was a very short-term focus on profit which led to a problem with culture and values," Anthony Salz, a veteran lawyer who wrote the 236-page report at Barclays's invitation, told Reuters.
"It appeared to emphasize financial performance rather than looking after customers. That was reinforced by the pay structures."
"If Barclays is to achieve a material improvement in its reputation, it will need to continue to make changes to its top levels of pay so as to reflect talent and contribution more realistically, and in ways that mean something to the general public."
The rock 'n' roll style rewards earned by top investment bankers at Barclays prompted an outcry among austerity-weary Britons last year after the bank was fined $450 million for its role in manipulating global benchmark interest rates.
Barclays hired Salz, who is vice-chairman of investment bank Rothschild, to review its culture and business practices after the rate rigging scandal.
His report, which cost the bank nearly 15 million pounds, made 34 recommendations with improvements in pay looming large, including a greater link to long-term performance.
While Barclays has cut overall remuneration levels, compensation for the top 70 executives was consistently above the average at other banks, the report said. Barclays paid some 428 employees one million pounds or more last year.
Since the report was commissioned, Barclays has appointed former retail banker Antony Jenkins as chief executive to overhaul its culture and focus.
Salz said the bank's long term incentive programs, which have resulted in maximum payouts of on average eight times salary for senior investment bankers, remained overly complex.
Barclays, which is reviewing the plans, said it would report back on how it intends to implement the recommendations before its annual shareholders' meeting on April 25
Jenkins has promised profound changes in behavior and culture but acknowledged it will take five to ten years to achieve them. In January, he told staff they should leave if they do not want to sign up to the new standards.
A BIT TOO CLEVER
Salz's report goes into forensic detail about Barclays' failures, from breaches of U.S. sanctions and the mis-selling of insurance products and hedging products to the rate rigging scandal and its defensive attitude to customer complaints.
"The report makes for uncomfortable reading in parts," Barclays Chairman David Walker said in a statement.
Walker's predecessor Marcus Agius and then CEO Bob Diamond left the bank last year in the wake of the interest rate rigging scandal.
Diamond, a former Wall Street trader, built up Barclays' investment bank from "edgy underdog" to global player in less than a decade, paying a premium to attract talent from more established players.
The report said that top management at the investment bank inspired loyalty but they did not like hearing bad news.
"This all combined to create an environment in which leaders were rarely effectively tested or challenged, contributing to a sense of ambiguity about what was considered right and wrong," the report said.
When the financial crisis broke, Barclays' relationship with regulators became tense.
"They were seen to become somewhat aggressive and a bit too clever by half and that led to less than ideal relationships including with the UK regulator," said Salz.
(Editing by Carmel Crimmins and David Cowell)