The British banking debate after Bob Diamond

Financial Services
  • Bob Diamond’s resignation as Chief Executive of Barclays bank clearly marks a turning point in the politics of banking in the UK.
  • The most significant political and regulatory outcome from these events will be to renew the debate about universal banking. Whereas to date this debate has focused on scale, implicit subsidy and systemic risk, it will now focus on culture, personal character and contamination from the values of the trading floor to the rest of a banking institution. Because these things cannot be regulated, the probability is that politicians will focus on their proxies, especially pay.
  • The gap between the inherent values and perceived risks of retail and investment banking has been further widened by the events of the last two months. For leaders of universal banks, especially those who have risen through investment banking, closing this gap in the mind of political stakeholders poses a particular challenge. Mr Diamond’s belated ‘citizenship agenda’ at Barclays was well-conceived, but fatally hobbled by this tension.
  • By falling on his sword, Mr Diamond has created the possibility of a rapprochement between his former bank and British political opinion formers. The bigger issue for the bank he leaves behind and others like it is how – or if – it is possible after the crisis to rebuild political and regulatory confidence in the kind of financial markets businesses he dedicated his career to building and the people who run and profit from them.

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