Tuesday, 9 February 2010

Varley's warning

Barclays’ John Varley spoke with the precision you’d expect of a big bank’s chief executive when being interrogated by the Treasury Select Committee earlier.

There was no real tough questioning, perhaps because John Mann MP and a few others were absent.

The CE delivered this warning to trigger-happy regulators.

“To be clear - there is no economic growth without risk-taking by households and by businesses. The banks’ job is to ensure that they support that risk-taking responsibly.

“A risk free system is a system without growth, a system without employment and none of us wants that.

“The anxiety I have is that if you look at the banking system as a whole…you would see returns on capital operating at below the cost of capital.

“We’ve got to ensure that this equation between cost of credit, credit supply and the returns generated by banks is an equation that is on one hand creating fairness to consumers…and on the other hand creating adequate terms to shareholders.

“…massive reform beyond where we are already, layering capital requirements on banks, would have the effect of making banks both risk averse and, where they take the risk, charging for that risk in a way that consumers might consider unacceptable.”

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