Former Barclays chief calls for bank release: US banker Bob Diamond pushes to scrap rules that hampered lenders after financial crisis
- Bob Diamond pushes for an end to “segmentation” rules put in place in the wake of the financial crisis to prevent big banks from making risky investments
- Controversial banker pushes for change in measures created to prevent banks from investing ordinary savers’ money in risky financial securities
- We understand that he hopes to unlock growth in the banking industry and open lucrative deals for his investment firm Atlas Merchant Capital.
- Diamond’s company is one of a series of lenders – including Lloyds, HSBC and Barclays – who have also called for changes to the cantonment system.
Former Barclays boss Bob Diamond is pushing for an end to the “reservation” rules put in place in the wake of the financial crisis to prevent leading banks from making risky investments.
The controversial banker, who was at the forefront of banking giant Barclays ‘response to the crash, is pushing for a change in measures created to prevent banks from investing ordinary savers’ money in risky financial securities.
The Mail on Sunday understands it hopes to unlock growth in the banking industry and open lucrative deals for its investment firm Atlas Merchant Capital.
Controversial: Bob Diamond pushes for change in measures created to prevent banks from spending ordinary savers’ money on risky financial securities
Atlas has called for changes as part of a major review led by city veteran Keith Skeoch.
The Mail on Sunday learned that Diamond’s company is one of a series of major lenders – including Lloyds, HSBC, Barclays, NatWest and Nationwide – who have also called for changes to the so-called cantonment system.
Diamond’s company told Skeoch that the cantonment restrictions had killed competition by forcing the biggest banks to invest billions in safer investments – especially mortgages – rather than using the money for the bank. ‘investment.
This sparked a mortgage price war that forced a series of smaller competitors – including Tesco Bank and Sainsbury’s Bank – to exit the market. Meanwhile, the tough rules have stifled the growth of new entrants.
But Tory MP Kevin Hollinrake said: “You never take a fence down until you know why you put it in.
“There were good reasons for ring-fencing. We saw at the time that banks played with depositors’ funds – with unfair effects on consumers.
“We have to be very careful before we remove these things that have been put in place for a good reason. We must not take the banks ‘position as a fait accompli and we must balance that with the concerns of regulators and the reason for its creation in the first place.’
Diamond, who was born in the United States, was instrumental in efforts to back Barclays through the financial crisis to avoid a taxpayer bailout. He also negotiated the takeover of the Lehman Brothers investment bank after its bankruptcy.
Diamond was later called the ‘unacceptable face of the bank’ by then-business secretary Lord Mandelson for claiming he was vying for a salary worth £ 60million. The banker was ousted from his post as managing director of Barclays when the bank was fined £ 290million for trying to rig rates on interbank lending.
Atlas also warned that large-scale lenders are now overexposed to bankruptcies of UK companies, as the complexity of the rules means they have given up on lending to overseas clients.
The company said taxpayers were not protected by the program because the biggest lenders are still “too big to fail” and would need a government bailout if they went bankrupt.
Industry body UK Finance has also called for a “dismantling” of the cantonment rules. He said banks are well protected by a host of other security measures such as strict capital buffers.
Banks must now undergo regular “stress tests” to ensure that they could survive a major financial crisis. Executives also risk jail time if they run their bank irresponsibly.
In a submission sent to Skeoch, UK Finance said: “The Covid pandemic has brought about unprecedented changes in economic activity. Reforms undertaken after the global financial crisis have enabled the financial system to support households and businesses in through these changes, rather than amplifying the disruptions. This proves the effectiveness of the various reforms as a whole. ‘
UK Finance also claimed that the rules had forced domestic banks to focus on a narrower product range, making their business models less diversified. He said this trend “potentially increases the risk of bank failure.”