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It is fair to assume that, if any of the last executive directors of Barclays Bank would have asked to sign a letter urging the government to rescind the punitive regulations, they would have taken the opportunity.
From John Varley, who directed Barclays during the financial crisis of 2008, to Jesus, CEO of up to three years and a bit years ago, the bank’s chiefs have constantly campaigned to resist government rescues and defend onerous regulations.
No Venkat, as is universally known. CS Venkatakrishnan, head of Barclays since the end of 2021, last week was made public in support of the so -called ring conferences, one of the onerous rules after 2008 that force large complex banks to structurally protect their central deposit operations in the United Kingdom within separate legal entities with higher levels of capital.
Arguing that he was “on the side of depositor protection“, Venkat recalled that not long since the banks had to be rescued by the State. The ring of ring should not be discarded or diluted, he said.
A few days before, the Barclays chief refused to sign a letter to the United Kingdom Chancellor Rachel Reeves, from other Top Bank CEOs, taking the opposite polar line. That letterOrchestrated by the HSBC Chief, Georges Elhedery, had urged Reeves to demonstrate that “the government’s determination to do what is needed to promote growth” and commit to his speech from the house of the Julio’s mansion that the ring field would be abolished during the current parliament.
The dissent of the city throughout the city of London (even within Barclays), in addition to a mystery of why the bank that has probably lost more of the ringfense restrictions, thanks to its large investment bank and credit card operations from the USA. UU., He would like to keep such curbs.
Like HSBC, Barclays says that bank experts have spent at least 1 billion implementing Fencing. The rules impose continuous costs, such as duplicate operations and general governance expenses, and create inefficiencies restricting how funds can be implemented within the broader group. So why has Barclays come out to the limb, apparently against his own interest?
Venkat’s public reasoning, a desire to protect the depositors, sounds noble but hits a strange note: surely a CEO of a bank must be sure that it can be a reliable tutor of the client’s money, without the need for a state diktat. Maybe his previous career in Barclays – First as risk director, then as head of markets, he has made him distrust that his investment bankers do not use retail deposits. A hard rule is a useful strut.
Pragmatism also plays a role. In addition to the sunk cost of the implementation, Venkat has built a complete strategy for Barclays that aligns with the structure with frankness, doubling the retail bank of the United Kingdom and reducing growth in its global investment banking operations. Taking a pro-regulation line can also cure more policy formulators who generally do not like to be publicly pressed. (Venkat broke with much of the business world the past autumn When he praised The widely criticized fiscal collection budget of Reeves).
The calculation for the chancellor is complicated. Ringfencing has probably delayed Britain banks, particularly internationally, but it is fantasy to think that the rule is the fault of its inability to maintain the rhythm of Wall Street rivals: a weaker domestic economy, the trauma of 2008 (particularly in Natwest/Rbs and Barclays) and the most strict regulations in other areas have been much more impressive.
The defenders of the reform also postulate that the ring base is now superfluous: since other safety mechanisms were introduced: requirements for capital, liquidity and tapa ordered in a crisis) have been significantly hardened: it does not need a belt and orthopedic devices if your waist is already tight.
Few other countries have adopted a similar construction. Switzerland is one, although its 2023 decision to force the credit failure of a rescue by UBS, instead of saving the domestic operation with accounting and decreasing the rest of the group, did nothing to demonstrate the effectiveness of said mechanism.
As with any deregulating measure, Reeves will have to compensate for the benefits of growth against disadvantages of losing a security mechanism, particularly for consumers, also known as voters. In addition to promoting the safety of deposits (beyond the guarantee of £ 85,000 throughout the sector), bankers believe that the ring face has maintained artificially low mortgage rates. Once the financing of the United Kingdom is no longer trapped, the rates could increase. “Eliminating childhood childhood would be a silly policy and a strange policy,” says Sir John Vickers, the Oxford academic who led the regulatory commission that conceived the rules.
Even if Reeves concludes that Elhedery’s camp is right, and Venkat is wrong, would take a long time, and a new primary legislation, revoke childhood. A rapid rate for growth is certainly not.