Diamond warns MPs banking reform could hamper recovery

Planned reforms of financial regulation to prevent a repeat of the banking crash will cost Barclays alone as much as £2 billion a year, the bank’s chief executive Bob Diamond warned yesterday.

And he told MPs that measures to increase the security of the banking system, including tougher capital requirements, could undermine economic recovery by making risk-taking more difficult.

But Diamond said that – while he could “never say never” – he did not expect or wish to move Barclays’ headquarters overseas to avoid the burden of new regulation.

Hide Ad
Hide Ad

“We have been in the UK for 320 years. This is where we want to be and where we intend to be,” he told the House of Commons treasury select committee.

Investment arm Barclays Capital, which is expected to bear the brunt of any additional cost, could move its HQ to Asia or New York but location would be “almost a non-issue” as the business would continue to be regulated primarily by UK authorities, he said.

Chancellor George Osborne is due to announce the government’s official response to the Independent Commission on Banking’s (ICB) recommendations for reform on December 19. He is expected to approve proposals requiring banks to set aside more cash as a cushion against potential losses and to “ring-fence” high street retail operations from riskier investment arms.

Diamond told the committee that the expected changes were “not a positive” for Barclays, but “we can live with it”.

He suggested that the changes would remove the justification for the government’s £2.5bn-a-year banking levy, by ending implicit state subsidies to the industry.

Estimates put the total cost of the ICB proposals to the industry in the UK at £4-7bn a year, the bulk of which would be borne by the “big four”, including Barclays, he said.

For Barclays, the impact would be “probably north of £1bn”, he said, adding: “Does it get to £2bn? We are not sure yet.”

Diamond warned that excessive regulation could undermine growth.

Hide Ad
Hide Ad

“The worry I have is that we are all trying to balance making the financial system safer and sounder but also driving jobs and economic growth,” he said.