The city opens the rift over the ringing of banks in the United Kingdom

Digest opened free editor

Rola Khaleda, FT editor, chooses her favorite stories in this weekly newsletter.

It is fair to assume that if any of the few executives at Barclays Bank were asked to sign a letter urging the government to cancel the punitive regulations, they have jumped to this opportunity.

From John Farley, who was running Barclays during the 2008 financial crisis, to Jess Stalli, CEO for a period of up to three years ago, three years ago, the bank presidents have been constantly campaign to resist the government’s rescue operations and enter the hard regulations.

Not Venkat, as is known globally. Cs Venkatakrishnan, President of Barclays since late 2021, was published last week to support the so -called Ringfense, one of the arduous rules after 2008 that forces the major complicated banks to protect their basic operations for the UK in terms of structural terms within separate legal entities with higher levels of capital.

On the pretext that it was “In addition to protecting the depositorVenkat recalled that it had not been long since the banks were rescued by the state.

A few days ago, Barclays coach refused to sign a message to UK advisor Rachel Reeves of senior executives of the other bank, and took the opposite line. That message,, Which was organized by HSBC president, George Ilidiri, urged Reeves to prove “the government’s determination to do what it requires to enhance growth” and pledged in its palace speech in July that Ringfense will be canceled during the current parliament.

An opposition braid across the city of London (including in Barclays itself), as well as a puzzle of why it is more likely that the bank that lost more than Ringfense restrictions, thanks to large investment banking services and US credit card operations, wants to maintain these restrictions.

Like HSBC, Bank Banklays said by those familiar with the bank’s spending at least 1 billion pounds in the implementation of Ringfense. The rules impose ongoing costs, such as repeated operations and general expenses of governance, and create shortcomings by restricting how to spread money within the wider group. Why did Barclays go out to one of the parties, apparently against its own interest?

General thinking about Venkat – the desire to protect depositors – seems noble but strikes a strange note: the bank’s CEO must be sure that he could be a trusted guardian of customer money, without the need for governmental occurrence. Perhaps his previous career in Barclays First, as the head of risk officials, then the head of the markets – made him do not trust that his banker in investment will not offend the use of retail deposits. The difficult rule is a useful pillar.

The pragmatism also plays a part. In addition to the amazing cost of implementation, VENKAT has built a full strategy for the Arciols that is in line with the flexible structure, which doubles retail banking services in the UK and reduce growth in its global investment banking operations. Taking a supportive line of organization may also lead to further preference with policy makers who generally do not like pressure publicly. (Fenkat broke a lot of the business world last fall When he praised Reeves extensively criticized the tax lifting budget.)

Calculator and integration of the consultant is a difficult one. Ringfense is likely to have placed banks in Britain, especially at the international level, but it is strange that the base is to blame their failure to keep pace with the Wall Street competitors: the weakest local economy, the shock of 2008 (especially in Natwst/RBS and Barclays) and the most striking regulations in other regions more influential.

Reform advocates are also assumed that Ringfense is now unnecessary: ​​since it has been presented, other safety mechanisms-capital, liquidity and organized winds have been tightened in a significantly crisis: you do not need a belt and arches if your belt is already narrow.

A few other countries have adopted a similar structure. Switzerland is one, although its decision in 2023 to force the credit failure in the UBS rescue process, instead of rescuing the local process with resonance and going out in the rest of the group, did nothing to prove the effectiveness of such a mechanism.

As with any decomposition procedure, Reeves will have to compensate for the advantages of growth against the negative aspects of losing the safety mechanism – especially for consumers known as voters. Regardless of the enhancement of deposit security (outside the guarantee of 85,000 pounds at the sector level), bankers believe that Ringfense has kept the mortgage rates artificially low. Once the UK financing is no longer trapped, prices can rise. “The removal of Ringfense will be a foolish policy and a strange policy,” says Sir John Vickers, Academy of Oxford who led the organizational committee that depicted the rules.

Even if Reeves concludes that the Elheedry camp is right, and that Venkat is wrong, it will take a long time – and new initial legislation – to cancel Ringfation. Fast stimulation of growth is certainly not.

[email protected]