Barclays chief in plea for freedoms
Piling too much regulation on banks could push up the cost of credit and damage the economy, the head of banking giant Barclays said yesterday.
Chief executive John Varley told MPs on the Treasury Select Committee that overburdening the |financial sector could make banks ‘risk-averse’ and lead to ‘unacceptable’ borrowing costs for consumers.
He said: “The economy depends on banks being prepared to take risks and lend. Swamp them with capital requirements and they will not be able to step up to the plate.”
His comments come as regulators across the world weigh up changes such as extra capital and liquidity restrictions for banks to stave off future taxpayer bail-outs — as well as potentially splitting out retail banking from riskier commercial banking activities.
Barclays avoided taking taxpayer cash by raising billions from the Middle East at the height of the crisis. Mr Varley said the bank had doubled its core tier one capital ratio— a key measure of financial strength — in the past two years to act as a buffer against loan losses, which reached £5bn in 2008.
And despite ‘understandable’ public anger over profits in a deep recession, he said a return to financial health for banks was ‘a precondition of health in the real economy’ as public support is gradually withdrawn.
But he also acknowledged: “If we look at the sector as a whole, trust has broken down between the banking sector and the public.
“I think we will be judged on two things; one is how we lend and the other is how we pay.”
Challenged by MPs on whether some financial institutions had become too big to fail, Mr Varley argued bigger banks were more |effective at spreading risk, with volatility more prevalent among smaller players.
“The system will not be served by making big banks smaller, the system will be served by making big banks safer,” he added.
“Artificial constraints on bank balance sheets are not the right way to solve the problems we have experienced,” he added.
Meanwhile, politicians were today urged to back a ‘Robin Hood tax’ on banks' financial transactions to raise billions of pounds to fight poverty, protect public services and fight climate change.