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* Investment bank leaders ambiguous about right andwrong-report
* Did not want to hear bad news
* Bank put profit before customers
* Bank seen as "too clever by half"
* "Report makes uncomfortable reading"-Barclays chairman
By Matt Scuffham
LONDON, April 3 (Reuters) - Barclays needs to reinin pay for top staff and tighten control of its operations torepair its reputation after a string of scandals, a reportcommissioned by the lender said on Wednesday.
In what Britain's second largest bank described as"uncomfortable reading", the review said the group's rapidtransformation from domestic retail lender to global universalbank created a sprawling set of businesses with their ownculture and an emphasis on profit, sometimes at all costs.
Investment banking leaders were ambiguous about right andwrong, the report said.
"There was a very short-term focus on profit which led to aproblem with culture and values," Anthony Salz, a veteran lawyerwho wrote the 236-page report at Barclays's invitation, toldReuters.
"It appeared to emphasise financial performance rather thanlooking after customers. That was reinforced by the paystructures."
"If Barclays is to achieve a material improvement in itsreputation, it will need to continue to make changes to its toplevels of pay so as to reflect talent and contribution morerealistically, and in ways that mean something to the generalpublic."
The rock 'n' roll style rewards earned by top investmentbankers at Barclays prompted an outcry among austerity-wearyBritons last year after the bank was fined $450 million for itsrole in manipulating global benchmark interest rates.
Barclays hired Salz, who is vice-chairman of investment bankRothschild, to review its culture and business practices afterthe rate rigging scandal.
His report, which cost the bank nearly 15 million pounds,made 34 recommendations with improvements in pay looming large,including a greater link to long-term performance.
While Barclays has cut overall remuneration levels,compensation for the top 70 executives was consistently abovethe average at other banks, the report said. Barclays paid some428 employees one million pounds or more last year.
Since the report was commissioned, Barclays has appointedformer retail banker Antony Jenkins as chief executive tooverhaul its culture and focus.
Salz said the bank's long term incentive programmes, whichhave resulted in maximum payouts of on average eight timessalary for senior investment bankers, remained overly complex.
Barclays, which is reviewing the plans, said it would reportback on how it intends to implement the recommendations beforeits annual shareholders' meeting on April 25
Jenkins has promised profound changes in behaviour andculture but acknowledged it will take five to ten years toachieve them. In January, he told staff they should leave ifthey do not want to sign up to the new standards.
A BIT TOO CLEVER
Salz's report goes into forensic detail about Barclays'failures, from breaches of U.S. sanctions and the mis-selling ofinsurance products and hedging products to the rate riggingscandal and its defensive attitude to customer complaints.
"The report makes for uncomfortable reading in parts,"Barclays Chairman David Walker said in a statement.
Walker's predecessor Marcus Agius and then CEO Bob Diamondleft the bank last year in the wake of the interest rate riggingscandal.
Diamond, a former Wall Street trader, built up Barclays'investment bank from "edgy underdog" to global player in lessthan a decade, paying a premium to attract talent from moreestablished players.
The report said that top management at the investment bankinspired loyalty but they did not like hearing bad news.
"This all combined to create an environment in which leaderswere rarely effectively tested or challenged, contributing to asense of ambiguity about what was considered right and wrong,"the report said.
When the financial crisis broke, Barclays' relationship withregulators became tense.
"They were seen to become somewhat aggressive and a bit tooclever by half and that led to less than ideal relationshipsincluding with the UK regulator," said Salz.
