UPDATE 3-New Barclays chairman flags more change to meet challenges

* Chairman McFarlane signals plan to accelerate change

* Says Barclays still a 'recovery proposition' for investors

* Operations that can't be revived face axe

* CEO expects significant progress on conduct issues thisyear (Adds shareholder comments, AGM vote results)

By Steve Slater and Matt Scuffham

LONDON, April 23 (Reuters) - New Barclays ChairmanJohn McFarlane said the British bank still faces formidablechallenges and signalled his intention to accelerate itsturnaround plan within an hour of taking charge.

McFarlane took the helm after Thursday's annual shareholdermeeting, charged with overseeing its attempts to stamp outwrongdoing and improve performance, and immediately set out hispriorities in a letter to shareholders.

"We ... need to get the errors of the past behind us, toachieve a satisfactory rate of revenue growth, greater costdiscipline and a more dynamic reallocation of capital," he said.

McFarlane acknowledged that the poor performance of Barclaysshares -- trading below most British lenders at 0.7 times thevalue of its assets -- mean that the bank is still "a recoveryproposition for shareholders".

Barclays says it is on the road to recovery under ChiefExecutive Antony Jenkins, but it still needs to resolveallegations over alleged misconduct in the past while bringingreturns back above its cost of capital and deciding how big tokeep its investment banking operation.

McFarlane, who oversaw a radical turnaround of insurer Aviva, said he is optimistic of a successful outcome, havingdealt with similar situations in the past.

That could include the axeing of businesses that struggle tomake a decent return. "We need to ... put in place plans andaction to improve them or curtail those that are unable to beresuscitated," McFarlane said.

'BRING YOUR CHAINSAW'

McFarlane's reputation as a no-nonsense boss was referred toby several investors at the meeting.

Shareholder Philip Meadowcroft said the incoming chairman isa "ruthless turnaround specialist" who needs to enforce overduecultural and structural change at Barclays. Another investorurged him to "bring his chainsaw from Aviva".

One priority decision will be whether to continue shrinkingBarclays' investment bank. Jenkins is cutting 7,000 jobs fromthe business -- about a quarter of the total -- but has said hecould go further after it delivered return on equity of only 2.7percent last year as tougher regulations hit profitability.

McFarlane, a Scot, was appointed in September and has beenon the Barclays board since January.

He said the bank needed to press ahead with work torestructure its legal entities in Britain and the United Statesand run down 75 billion pounds ($112.9 billion) of assets it nolonger wants.

CEO Jenkins told the meeting he expects to continue to rundown that portfolio this year, cut more costs and make goodprogress on settling outstanding investigations into themisconduct issues, such as alleged manipulation of foreignexchange rates.

"Resolving these issues is an important part of our plan forBarclays and I expect that we will make significant, thoughsometimes difficult, progress in this area in 2015," he said.

The bank avoided the firestorm of criticism over staff paythat has overshadowed recent AGMs, with 97.5 percent ofshareholders who voted approving its remuneration report. Allother resolutions also passed easily.($1 = 0.6643 pounds) (Editing by Keith Weir and David Goodman)