Barclays Chief: Tax Planning Still Important
Tax planning will remain an important element of the services Barclays offers to corporate clients despite its decision to close a controversial unit which generated vast profits for the bank, according to one of its most senior executives.
An internal memo written yesterday by Eric Bommensath, the head of markets within Barclays' investment bank, said the group would be involved in "a narrower range" of tax-related activity than in the past but that "efficient tax planning remains an important part of financial transactions in complex global markets".
The memo has been obtained by Sky News.
Mr Bommensath's note followed the announcement by Antony Jenkins, Barclays' chief executive, that he would close the Structured Capital Markets (SCM) business, which had delivered bumper profits - and bonuses - but caused reputational damage to the bank by undertaking complex transactions purely to help clients avoid tax. Sky News revealed at the weekend that SCM would be closed.
Speaking yesterday, Mr Jenkins said it was not yet clear whether the employees in the SCM business would be redeployed elsewhere within Barclays. Some of them are likely to be among 1800 investment bank staff being axed as part of the new chief executive's effort to make the business more efficient.
Mr Bommensath's note made it clear that tax planning would remain an integral part of Barclays' offering to clients, and may raise questions about exactly which activities will be circumscribed under the bank's new rules.
"Our tax-related activity will now be delivered by teams integrated into the FICC [fixed income, currencies and commodities] and Equities businesses within Markets, and clearly linked to commercial activity. This will mean that we are involved in a narrower range of tax planning than we have been in the past. We will also maintain a Markets Portfolio Management Group, responsible for managing down our legacy positions over time," he wrote.
"Graham Wade will join the Markets Management Committee and be responsible for the integration of tax-related activity into the Markets business, reporting to me. He will focus particularly on implementing a Tax Risk and Approvals Framework, which will ensure that all new activity is consistent with our tax principles.
"Efficient tax planning remains an important part of financial transactions in complex global markets. By integrating support for our clients' tax planning into the Markets business we can better deliver commercially-driven tax solutions that are compatible with our purpose as an organisation."
Barclays also published a series of tax principles yesterday which it said would govern its involvement in transactions.
The Guardian reported today that the SCM unit will take up to a decade to close as Barclays winds down long-term schemes for clients.
Mr Jenkins declined to specify yesterday how much profit SCM had generated for Barclays. The division was recently accused of aiding "industrial scale tax avoidance" by Lord Lawson, the former Chancellor and a member of the Parliamentary Commission on Banking Standards.