At a time when the economy is still weak and bankers’ reputations still badly tarnished, this will be seen by many as a provocative move on behalf of Barclays' board, signifying business as usual from the bank’s bosses. It certainly won’t endear them to the Con-Lib coalition, which has been vocal on the need for reform of the bonus culture in banking.
But on the other hand Barclays has never enjoyed exactly cordial relations with Whitehall, so perhaps they think that doesn’t really matter. Current boss John Varley – who is apparently leaving because he wants to do other things while he is still young enough - caused a great deal of government chagrin by refusing to play ball over government bail-outs at the height of the crisis.
And while Diamond’s appointment will clearly ruffle a few feathers, it’s pretty hard to argue that he isn’t well qualified for the job. As boss of Barclays Capital, Diamond has built the investment banking arm of the firm into easily its best performing and most profitable division. Barclays was also one of the few British banks which didn’t need a public bail-out to see it through the recession, which rather suggests that for this firm at least, the bonus culture actually works.
It’s also significant that the Government is in the middle of a major banking review, which could lead to a recommendation that ‘universal’ banks like Barclays (those which combine retail and investment banking under one roof, also known as ‘casino’ banks) be broken up. Vince Cable for one is known to strongly favour this approach.
There’s no doubt that the appointment sends a number of clear messages to those in power about Barclays’ intentions, should that occur. Diamond is not only an i-banker to his fingertips, he is also New York-based. You don’t have to be a soothsayer to realise what this means – if it comes to the choice, Barclays is staking its future on investment banking rather than retail banking, and possibly headquartered outside the UK, to boot. Something for the politicians to think hard on.
Funnily enough, the urbane and thoughtful Stephen Green, chairman of HSBC (the other big high street player which didn’t take a state handout) is also on his way to pastures new. But he is going into Government, as trade minister – hardly something we can imagine Bob Diamond wanting to do.
But his move is a timely reminder that in banking, just as in other walk of business, there’s many more than one way to successfully skin a cat. And that the danger with over-regulation of any sector is that individual freedoms to create diverse organisations and cultures which actually work can be eroded.
Diamond may be paid an awful lot of money, but if he keeps Barclays at the top of its game then who’s to say he isn’t worth it?