Bloomberg News

Barclays’s Diamond Warns of ‘Balkanization’ Through Regulation

January 26, 2012

Jan. 26 (Bloomberg) -- Barclays Plc Chief Executive Officer Robert Diamond said planned U.K. regulations risked the “Balkanization” of international banking.

The bank wants to keep “a balance among the major economies so that we encourage the continued development of international banking and not the return to protectionism and Balkanization,” he said in an interview with Bloomberg TV today in Davos, Switzerland. John Vickers’s report is “a type of example of the Balkanization I’m talking about,” he said.

Vickers, chairman of the Independent Commission on Banking, recommended in September that banks insulate consumer units from investment banking to increase stability in the financial system. The proposals may cost the industry as much 7 billion pounds ($11 billion) and should be implemented by 2019, the ICB said.

“We have been very public that we would have preferred a different route,” as the cost of retail banking will increase, Diamond said. Being a universal bank with retail and investment banking operations “is a diversifier of risk not an aggregator of risk,” he said.

The lender has considered “all scenarios” on whether to maintain the universal model or break the bank up. The different sides of the businesses have propped each other up over time, he said.

“It brings not just diversification of risk but also diversification of profitability -- there have been years when the investment bank might have been two thirds and the retail bank one third of the earnings,” he said. “We’ve seen other years when it’s been just the opposite, as we’ve seen in 2011.”

Diamond, who became CEO in January 2011, was awarded as much as 10.1 million pounds in salary, bonuses and stock, making him the U.K.’s top-paid bank CEO. Today he said the lender’s board will decide what bonus he will receive. As to his decision on whether he will accept the pay, “I think that’s a decision we’ll make at the time,” he said. The British government has asked for restraint from banks.

-- With assistance from Ambereen Choudhury and Liam Vaughan in London. Editors: Francis Harris, Jon Menon

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net.

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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