THE CHAIRMAN of Barclays has issued a warning that Britain’s banks will be damaged if regulators are too rigorous in their implementation of a global crackdown on bonuses and capital requirements while other nations, such as the US, are lax.
"There is the real risk of regulatory arbitrage," Marcus Agius told the Financial Times. "The same principles will apply in different ways in different capital markets with different outcomes.
“This is a global financial system. It is fungible. So I am very concerned there should be a level playing field.”
In particular, Mr Agius said, the communique that stemmed from last month’s G20 meeting of world leaders in Pittsburgh, ruling that the bulk of bonuses should be deferred over three years rather than paid upfront, was “susceptible to different interpretations”.
The US Federal Reserve has indicated it sees one G20 recommendation – that 40-60 per cent of bonuses should be deferred – as an “example” rather than a binding proportion.
Mr Agius’s warning comes as the banks that have prospered recently gear up to pay near-record bonuses for this year. Goldman Sachs last week said it was on track to pay its staff an average of nearly $700,000 (€470,000).
Mr Agius warned regulators not to impose excessive additional capital requirements. Banks should not be vilified for taking risk, adding that amid the crisis, proprietary trading, using the bank’s capital to bet on market movements, had been “demonised” as “casino banking”.
“If excessive risk is taken out of the system, that’s good,” he said, “but we have to be very careful where we draw the line. My view is that prop trading has been demonised.”
Barclays says it no longer operates dedicated proprietary trading teams, but its traders frequently take positions on the bank’s behalf alongside the “flow business” they are doing on behalf of clients.
