Barclays boss breaks from FTSE 100 peers on Reeves lobbying
The chief executive of Barclays has defended the ring-fencing regulation facing British banks, despite his FTSE 100 peers calling on the Chancellor to abolish it.
CS Venkatakrishnan told Sky News on Wednesday morning that the benefits of protection offered by the rules outweigh the costs of implementing and administering the system.
The UK’s ring-fencing regime requires major banks to separate their retail banking operations from their investment banking activities. It was introduced in the wake of the financial crisis to ensure stability and mandated in the Financial Services Act 2003.
Bosses of HSBC, Lloyds, Natwest and Santander wrote to Rachel Reeves lobbying for the Chancellor to axe the system.
The letter, obtained by Sky News, argues the system “is not only a drag on banks’ ability to support business and the economy, but is now redundant”.
The calls to scrap the 15-year old regime comes amidst the government’s pledge to scrap the red tape blocking economic growth.
Barclays has largest investment bank in UK
But Venkatakrishnan has argued whilst the points on “a bit of friction, trapped capital and the administrative costs are correct”, there are net benefits.
“There are two counterpoints: we have spent the money on the set-up and we make it work; but the more important fact is that you have to weigh against this the immense amount of depositor protection that the ring-fencing regime gives the country,” he said.
He added: “I don’t think ring-fencing should be relaxed or scrapped.”
The comments come as Barclays posted its first-quarter report on Wednesday morning.
The lender’s investment bank – a key arm of its business – bolstered income 16 per cent to £3.9bn amidst the market tensions at the beginning of the year.
The increased activity helped Barclays book a pre-tax profit of £2.7bn, ahead of the £2.5bn pencilled in by analysts.
Barclays has the largest investment bank network in the UK, which dwarfs its more domestic-focused peers Lloyds and Natwest.
The ring-fencing regime provides a distinct separation of risk for Barclays investment arm, protecting its retail banking operations from any losses and ensuring deposit safety.