Barclays stance on capital rules tests ties with regulator

Mon Jul 1, 2013 1:52pm EDT
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By Steve Slater

LONDON (Reuters) - Barclays' (BARC.L: Quote) promise to have a model relationship with industry regulators is already being tested as the bank tries to fend off pressure to meet stricter capital requirements without reining in lending.

The Bank of England delivered a quick and sharp response on Friday when Barclays Chief Executive Antony Jenkins said he may have to cut lending to UK households and companies if he is forced to meet a 3 percent leverage ratio quickly.

The BoE said it had made it "very clear" that any plans that restrict lending would not be accepted.

The leverage ratio measures a bank's capital against total loans. A higher ratio makes it less vulnerable to the kind of sharp drop in asset values that pushed some lenders to seek government bailouts during the financial crisis.

Barclays has had testy relations with banking regulators for years. While it avoided a state rescue during the crisis, its investment banking arm is often a target for critics of a free-wheeling banking culture which they say puts short-term gain before the interests of clients and the wider economy.

Jenkins' predecessor Bob Diamond was ousted in 2012 after Barclays was fined $450 million for rigging Libor interest rates and Jenkins said in April he wanted his bank "to become a model of constructive engagement with regulators".

The BoE's new Prudential Regulation Authority (PRA) told banks last month they must have a 3 percent leverage ratio and that Barclays fell short with a ratio of 2.5 percent after adjustments. Mutual Nationwide was the only other lender to miss the target.

Jenkins said on Friday he expected to reach agreement with the PRA in the next four weeks.   Continued...

A woman walks past a Barclays Bank in Leicester, central England April 24, 2013. REUTERS/Darren Staples