Barclays is to shut down the controversial tax planning division that helped
clients dodge millions of pounds of taxes as it tries to restore its shattered
The closure of Structured Capital Markets will be one part of a root and branch review of the bank's operations to be unveiled by new chief executive Antony Jenkins.
The division set up tangled schemes to help clients avoid millions in taxes in Britain and elsewhere. Last week, former Tory Chancellor Lord Lawson, a member of the Parliamentary Commission into Banking Standards, slammed the Barclays' operation, saying: "This was industrial scale tax avoidance."
Jenkins will admit the division's activities were unacceptable when he unveils his strategic review on Tuesday.
"There are some areas that relied on sophisticated and complex structures, where transactions were carried out with the primary objective of accessing the tax benefits. Although this was legal, going forward such activity is incompatible with our purpose. We will not engage in it again," he will say.
Under the strategic review, Jenkins has divided the bank's operations into about 75 activities, each of which has been analysed to see whether it is damaging to the bank's reputation and how much it contributes to profits.
The tax planning business is likely to be just one of several activities to be scrapped because they fail one or both tests.
In what will be seen as an attempt to break with the bank's recent toxic past, Jenkins will say: "We get it. The old ways weren't the right way to behave nor did they deliver the right results -- for banks themselves or for wider society.
"There must be a new approach for a new era in banking. Banks that fail to change will become failing banks."
The bank will signal a drop in bonus payments to staff from last year's pounds sterling 2.1 billion. Investment bankers' pay is likely to be cut by up to 20 per cent and several thousand job cuts are also expected.
However, Jenkins has made it clear that Barclays will continue to be a universal bank offering retail and investment banking services, though new regulations will force it and others to impose a ring-fence between retail and other banking business.
The review will be accompanied by Barclays' financial results for 2012. Underlying profits are expected to be about pounds sterling 7.2 billion, up from pounds sterling 5.6 billion the previous year. However, the final profit figure will be hit by compensation payouts for mis-selling payment protection insurance and complex interest rate-hedging products to small businesses.
The bank has already announced that its 2012 results will include pounds sterling 2.45 billion set aside for these mis-selling scandals.
The bottom line will also be hit by an adjustment because of the rising market value of Barclays' debts. Although amounting to a pounds sterling 4 billion knock to reported profits, the figure does not represent the cash cost to the bank and is widely regarded as an oddity of the accounting rules that has affected all banks in recent years.
Jenkins took over as chief executive in the autumn after his predecessor Bob Diamond was driven from office during the Libor rigging scandal.
The Libor case, in which Barclays traders were found to have tried to rig the London Interbank Lending Rate cost it pounds sterling 290 million in fines.
Distributed by MCT Information Services
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