Chief Executive Bob Diamond urges the private sector to become better citizens.
Speaking at the first ever BBC Today Business Lecture, which took place last night in London, Bob explained why it is vital for banks and businesses to adopt a broader set of objectives and responsibilities.
He highlighted the need for the private sector to focus on economic growth and creating jobs, especially in a period where governments around the world are cutting spending.
Bob told the invited audience at the new BBC Broadcasting House that for banks to play an effective role in spurring economic growth in the UK and around the world, they need to develop a more constructive relationship with all their stakeholders – including customers, the public, governments, regulators as well as shareholders.
Outlining the three key ingredients for rebuilding trust, he said: “First, we have to build a better understanding of how businesses and banks work together to generate economic growth; second, we have to accept responsibility for what has gone wrong; finally, most importantly, we have to use the lessons learned to become better and more effective citizens.”
Building a better understanding of banks’ role in society
To win back trust, banks need to do a much better job of creating an understanding of their role in supporting the economy.
“I know it sounds controversial to suggest banks must take risk, in the wake of a near collapse of the financial system, but banks serve little economic or social purpose unless they do so,” Bob explained. “Every time a bank gives someone a credit card they’re taking risk. And every time a bank lends to a small business that needs capital to grow, they’re taking risk.”
“It’s by taking these risks, and by managing them well, that banks support customers and encourage business innovation,” Bob added.
Accepting responsibility for what went wrong
Bob also underlined the need to accept that the 2008 financial crisis resulted in a widespread loss of trust in banks.
To restore confidence, the financial industry must demonstrate that it has learnt from what went wrong.
“In very simple terms, it’s important to demonstrate that we get it,” Bob said. “A lot of that learning has already been included in new financial regulation – regulation that I personally welcome. Let’s make no mistake about it – strong banks want strong regulation. No taxpayer money should ever again be put at risk to rescue a failed or failing bank.”
Banks also need to demonstrate that things have changed: “Today banks are not borrowing as much, they have significantly more capital, and they have far more stable and liquid sources of funds to lend.”
Banks and businesses have to become better citizens
However, the fact that banks are today safer and sounder is not enough to win back the public’s trust.
Banks, along with other businesses, must become better citizens: “First, it’s about how we behave, especially with our customers and clients, second, it’s about what we do, helping those customers and clients create jobs and economic growth, and third, it’s about how we contribute to the communities we serve in many other ways.”
“Consensus is growing that businesses must increase profits in a way that creates sustainable shareholder value, not just short-term gain,” Bob added. “And for me, the best way to create sustainable shareholder value is to focus on the interests of the customers, clients and the communities that we serve.”
Bob highlighted a number of examples which underlined Barclays commitment to its Citizenship agenda.
One of them was a £100m fund the firm recently launched to encourage farmers in the UK to invest in renewable energy. The initiative is in response to significant interest from farmers seeking to cut energy bills and generate new income by selling energy back to the country’s electrical grid.
“This helps to reduce carbon emissions so it’s good for the environment, it contributes to the UK’s long-term energy security, it helps farmers reduce their costs and secure additional income, and it also makes commercial sense for us,” Bob explained. “This is a perfect example of how good environmental practice can make good business sense as well.”
“The answer must be ‘yes’”
Bob closed the lecture by offering a positive answer to the question of whether banks can be good citizens.
He reaffirmed Barclays commitment to supporting the UK economy: “We have a strong and imaginative business community here in the UK. We should all commit to supporting them with confidence. As the leader of a bank, with 150,000 colleagues – a bank that has been headquartered in the UK for 320 years – I am ready to commit, we are ready to commit.”
The event on Thursday was hosted by John Humphrys, presenter of the Today programme on BBC Radio 4.
It is part of a new series of annual lectures launched by BBC Radio 4, which features business leaders and other prominent figures speaking about current issues facing the business world.