Barclays’ is to close a controversial tax advisory unit, as part of efforts by the bank’s chief executive Antony Jenkins to signal a clear break from the past, according to media sources.
PBI understands the bank will announce the closure of its structured capital markets (SCM) business during its interim full-year results announcement and strategy review on Tuesday 11 February.
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It is unclear whether the SCM unit was also giving advice to Barclays Wealth clients on tax efficiency planning and structured products.
Barclays refused to comment on any connection between the SCM and wealth businesses.
Tax evasion controversy
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By GlobalDataThe SCM unit, previously run by the bank’s highest-paid banker Roger Jenkins, also gave advice to large companies on how to avoid reporting and paying tax.
PBI understands the SCM unit was responsible for building a network of almost 300 offshore tax-haven subsidiaries, and made huge profits of as much as £1bn a year ($1.94bn in 2008) before 2010.
Barclays paid only £113m ($179.9m) of UK corporation tax in 2009, despite profits of £4.6bn that year.
The tax advisory unit linked to tax avoidance schemes was an example of the bank’s aggressive banking culture led under former CEO Bob Diamond.
Antony Jenkins said he was prepared to "shred" Diamond’s legacy in front of a UK parliamentary committee last week.
"We should shred those behaviours of the past; we should shred situations where we’re short-termist, too aggressive and too self-centred. It’s those things I want to eliminate from our culture," he said.
A "political" review
The long-awaited strategy review has been on Barclays’ calendar for "around four or five months", said a bank spokesman.
PBI understands Barclays’s review will sound like a political speech, much in a way to reflect the importance of Barclays’ image clean up.
Jenkins is expected to say that some areas relied on sophisticated and complex structures, where transactions were carried out with the primary objective of accessing tax benefits.
In front of the Banking standards committee, Jenkins said," I do not think it is appropriate for us to undertake transactions where the sole economic value amounts to tax savings."
Tuesday’s strategic review will be given just hours after the bank’s results for 2012, expected to show its profits are up on 2011.
The bank’s pre-tax profits at its wealth and investment management unit increased 31% in the third quarter of 2012 to £79m.
PBI also understands Jenkins will announce 2,000 staff cuts, mostly linked to the investment bank, to boost profitability.
