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To Cope with Ring Fencing Regulations, Barclays to Overhaul Back Office Operations


02/06/2017


To Cope with Ring Fencing Regulations, Barclays to Overhaul Back Office Operations
To help it comply with new post-crisis rules forcing British banks to ring-fence their retail operations from their riskier business, Barclays Plc is about to overhaul its back office operations under a restructuring program.
 
The bank said that when both of its two main operations are formally separated - retail and investment banking, support will be provided by a new company which has been formed and that will operate as a standalone unit.
 
A repeat of the 2008 crisis, when banks' bad bets threatened depositors' cash, is sought to be avoided by the ring-fencing rules. While the new rules apply to all lenders in Britain that have retail and commercial or investment banking activities, Barclays was not among those that needed a UK taxpayer-funded bailout.
 
Sources involved in the project told the media that while also keeping costs down by not having several separate back-office units, the aim is that critical support functions could continue to operate smoothly if either of its two main businesses were to run into trouble at Barclays.
 
Most of the more than 10,000 people who work in Barclays back offices operations in 17 countries around the world will be affected by the overhaul - including the creation of the new company known internally as ServCo.
 
Along with functions such as compliance with regulatory requirements, corporate relations, legal affairs and human resources, the bank's huge operations in India and South Africa that provide technology support and data management,  would be grouped together by it.
 
The sources said it was also likely to lead to some job losses even while for some staff this will simply involve a change in the name of the legal entity they work for.
 
Barclays has said that it will cost 1 billion pounds ($1.25 billion)  to comply with the ring-fencing rules and the project would soak up much of that amount.
 
In order to meet the rules that come into force in 2019, the upheaval that British banks face is shown by the structural change.
 
Similar models are being worked out by other British lenders. According to a company filing, as part of a move to insulate its back-office functions to comply with the new regulations, HSBC transferred 18,000 employees to a UK-based service company in 2015.
 
Shifting about 1,000 staff to the central English city from London, HSBC plans to base its ring-fenced British retail and commercial banking business in Birmingham. However both main operations would be kept headquartered at its building in the capital's Canary Wharf district by Barclays.
 
The creation of the new company, which will formally be called Barclays Services Ltd, is being overlooked by Paul Compton, Barclays' chief operating officer.
 
"From the outset, we've been keen to use the incoming ringfencing regulations to enhance the banking experience for our customers and clients, and the establishment of the service company is a great example of how we can put this into practice," Compton said.
 
With a view to it beginning operations by September, sources reportedly told the media that ServCo's management structure will be formalized by April.
 
(Source:www.reuters.com)