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Exclusive: Barclays Rebuff For JP Morgan Exec

(c) Sky News 2012

The City regulator is poised to demand that Barclays (LSE: BARC.L - news) strengthens the management of its vast investment bank after an eleventh-hour decision to shun a senior JP Morgan Chase executive as the successor to Bob Diamond.

I have learned that Jes Staley, chairman of corporate and investment banking at the Wall Street giant, was interviewed for the chief executive's post several times by directors of Barclays, including Sir David Walker, its new chairman.

As part of the recruitment process, Mr Staley had agreed to fly to London earlier this week to hold talks about the job with Lord Turner, chairman of the Financial Services Authority, and Sir Mervyn King, governor of the Bank of England, according to insiders.

Barclays directors had also flown to New York (Frankfurt: A0DKRK - news) to interview Mr Staley in recent weeks, with some board members keen for him to be appointed.

Instead, Barclays announced on Thursday that Antony Jenkins, the head of its retail and business banking operations, would succeed Mr Diamond.

People familiar with the recruitment process said that Mr Staley got as far as discussing with Barclays board members the timing of a potential announcement of his appointment as the bank's new boss. A director of Barclays insisted that Mr Staley had never been formally offered the job.

A senior City source confirmed, however, that Mr Staley's name had been floated past senior Treasury officials. The person suggested that Barclays had been alerted to the "reputational implications" of appointing an American investment banker as its new chief executive, and of needing to compensate a rival bank's employee for the loss of any share options prompted by their defection.

During his tenure, Mr Diamond, a US citizen, became an emblem of City excess because of the repeated rows over his lavish pay packages.

When he quit in July, Mr Diamond forfeited share options worth about £20m but Barclays reignited the row over bankers' pay by handing an £8.75m payoff to Jerry del Missier, its former chief operating officer.

Treasury sources and Barclays directors insist that there was no instruction to the bank from the Government or regulators not to appoint an investment banker to the role.

"There was an open discussion about it. Of course the question of having an investment banker running the bank again was an issue but appointing Antony was a unanimous board decision," a Barclays insider said.

Sir Mervyn and Lord Turner were criticised by the Treasury Select Committee last month for intervening to force out Mr Diamond. The two men informed Marcus Agius, the outgoing chairman, and Sir Mike Rake, deputy chairman, that Mr Diamond had "lost the confidence" of Barclays' regulators.

In its announcement on Thursday, Barclays called Mr Jenkins "the outstanding choice" for the position, which will involve a prolonged effort to rehabilitate the bank's reputation.

The FSA is expected to outline to the board of Barclays - with which it has clashed over the bank's attempts to "game" regulators - a series of steps to strengthen risk management and board oversight at its investment bank.

That is partly because Mr Jenkins has little direct experience of managing a global investment bank, and partly because the City regulator has been concerned for some time about the way parts of Barclays' investment banking operations have been run.

The news of Mr Staley's involvement in the search for Mr Diamond's successor sheds fresh light on the efforts of Barclays' directors to identify a new leader for the bank following the most turbulent two months in its recent history.

In addition to its £290m fine for attempting to manipulate the interbank borrowing rate, Barclays has found itself embroiled in a Serious Fraud Office probe into payments made to Qatari investors in the bank in 2008.

Barclays has also set aside £450m for compensating the victims of interest rate swaps mis-selling and well over £1bn because of the payment protection insurance mis-selling scandal.

Mr Staley is a long-standing JP Morgan executive, but last year appeared to lose ground in the race to succeed Jamie Dimon, the bank's chairman and chief executive, following a reshuffle of its senior ranks.

Last month, he was handed a new role which includes, according to JP Morgan: "Heading a group of senior executives who will work together to develop a view of what global banking will look like in the years ahead.

"More specifically, the team will focus on changing client needs, the impact of technology, the extensive requirements of global regulatory reform [and] future trade and investment flows".

A person close to Mr Staley said that he was given the impression by members of Barclays' board that he was the frontrunner to succeed Mr Diamond, who quit in July over the Libor-rigging scandal. Asked whether he would take the job, he said he would do so, according to an insider.

Mr Staley is widely respected on Wall Street and in the City and is understood to have a healthy relationship with British regulators. He has been a key part of JP Morgan's discussions over the Eurozone debt crisis with leading European officials and governments in the currency bloc.

Reports had speculated that Bill Winters, a former JP Morgan executive who was a member of the Government-appointed Independent Commission on Banking, was one of three shortlisted candidates to replace Mr Diamond.

However, people close to Barclays said that Mr Winters had not been interested in or interviewed for the role.

Barclays declined to comment while Mr Staley could not be reached.