David and Goliath

Barclays at long last came out with some good news. The UK bank on Thursday said it had chosen David Walker to be its next chairman, replacing Marcus Agius. Following a disastrous summer in which regulators exposed attempts by Barclays to manipulate Libor, it’s a solid first step towards repairing its battered reputation.

At this stage, Barclays is probably relieved to secure any credible new executive to join its ranks. Walker’s speedy recruitment means the bank avoids the difficult task of filling its top two posts at the same time. He will now play a key role in selecting a new chief executive to replace Bob Diamond, who, like Agius, also resigned over the London Interbank Offered Rate scandal. Walker is an important choice for a bank trying to get back onside with the authorities. He is a former head of the Securities and Investments Board, a forerunner of the Financial Services Authority, and has worked at the UK Treasury and the Bank of England. The bridge-building potential will be welcome relief for investors whose bank has often been at loggerheads with watchdogs since eschewing a state bailout in 2008.

The new chairman’s in-tray will be bulging. Besides interviewing new CEO candidates, the most pressing issues will be reformation of the culture at Barclays, its compensation model and long-term structure. With his experience in both investment and retail banking, Walker should be clear-minded about the many possibilities for the powerful but controversial Barclays Capital. And as the author of an independent report into corporate governance standards, it would be a surprise if Walker didn’t try to rein in Barcap’s racier activities and remuneration policies. The biggest snag is his age. At 72, Walker probably won’t stay beyond an initial three-year term. But if he can reposition Barclays and appoint the right person to lead the bank past the badly blemished Diamond era, the bank may well find it doesn’t need him any longer than that.