Former Barclays chief calls for bank release: US banker Bob Diamond lobbies to remove rules that curbed lenders in retail chains after financial crisis
- Bob Diamond lobbies for an end to ring-fencing rules instituted in the wake of the financial crisis to prevent major banks from making risky investments
- Controversial banker calls for a change in measures taken to prevent banks from putting ordinary savings into risky financial securities
- We understand he hopes to unlock growth in the banking sector and close lucrative deals for his investment firm Atlas Merchant Capital
- Diamond’s business is among a string of lenders – including Lloyds, HSBC and Barclays – that have also pushed for changes to the ring fencing scheme
Former Barclays boss Bob Diamond is lobbying to end ring-fencing rules put in place in the wake of the financial crisis to prevent major banks from making risky investments.
The controversial banker, who spearheaded banking giant Barclays’ response to the crash, is pushing for a change in measures taken to prevent banks from putting ordinary savings into risky financial securities.
The Mail on Sunday understands that he hopes to unlock growth in the banking sector and close lucrative deals for his investment company Atlas Merchant Capital.
Controversial: Bob Diamond calls for a change in measures taken to prevent banks from putting ordinary savers’ cash into risky financial securities
Atlas has called for the changes as part of a major review led by City veteran Keith Skeoch.
The Mail on Sunday has learned that Diamond’s company is one of a string of major backers – including Lloyds, HSBC, Barclays, NatWest and Nationwide – that have also pushed for changes to its so-called ring fencing scheme.
Diamond’s company has told Skeoch that ring fencing restrictions have cut out competition by forcing the largest banks to put billions into safer investments — especially mortgages — rather than use the money for investment banking.
This has led to a mortgage price war that has pushed a range of smaller competitors – including Tesco Bank and Sainsbury’s Bank – out of the market. Meanwhile, the strict regulations have throttled the growth of new entrants.
But Conservative MP Kevin Hollinrake said: ‘You never knock down a fence until you know why you put it up.
“There were good reasons for ring fencing. At the time, banks were seen to gamble with savers’ money – with unfair consequences for consumers.
“We have to be very careful before throwing out these things that were put in there for a good reason. We must not accept the position of the banks as a fait accompli and we must weigh that against the concerns of regulators and the reason for creating it.”
The American-born Diamond was a key figure in efforts to support Barclays in the financial crisis to avoid a taxpayer bailout. He also negotiated the acquisition of Lehman Brothers investment bank after its collapse.
Diamond was later labeled the ‘unacceptable face of banking’ by the then Chancellor of the Exchequer, Lord Mandelson, for claiming he was eligible for a £60 million pay package. The banker was ousted as CEO of Barclays when the bank was fined £290 million for manipulating interbank interest rates.
Atlas has also warned that major lenders are now over-exposed to bankruptcies of UK companies, as the complexity of the rules has led them to withdraw lending to foreign customers.
The company said taxpayers were not protected by the scheme because the largest lenders are still “too big to fail” and would require a government bailout if they went under.
Industry association UK Finance has also called for a ‘dismantling’ of the ring fencing rules. It has said that banks are well protected by a host of other security measures, such as strict capital buffers.
Banks now have to undergo regular ‘stress tests’ to ensure they can 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 led to unprecedented shifts in economic activity. Reforms introduced after the global financial crisis allowed the financial system to support households and businesses in these changes, rather than adding to the disruption. This provides evidence for the effectiveness of the various reforms in general.’
UK Finance has also claimed that the rules have forced domestic banks to focus on a more limited range of products, making their business models less diverse. It said this trend “may increase the risk of bank failures.”