Under new rules that have been drawn up by Sir John Vickers’ Independent Commission on Banking in 2011, banking bosses with more than £25bn of deposits must ring-fence their retail units from their investment banks by the end of 2019.
To coincide with the announcement, the City published a consultation paper which hailed ring-fencing as a victory for the City despite the fact that the banks concerned would collectively require up to £3.3bn in new capital.
However, the BoE has already been prompted to summon chairman John McFarlane for talks regarding an alleged secret plan.
Barclays’ credit rating derives a diversification benefit from its current structure. That benefit would evaporate if the investment bank was a standalone entity within the Barclays group, which has prompted executives to seek ways of retaining a direct link with the retail operations.
Sky News said: “Barclays believed that unless it received transitional relief from the PRA to operate its retail bank as a subsidiary of its investment bank, the credit rating of the latter business would risk being downgraded to junk status, triggering a sharp rise in its funding costs.
“The suggestion of a crisis meeting between chairman McFarlane and the BoE is sensitive for both parties because of the reputation that Barclays has earned since the 2008 financial crisis of attempting to ‘game’ industry regulators for its own benefit.”
In a statement in October, a Barclays spokesman said: “Barclays has not yet finalised its structural reform plan. Respecting the regulatory process, we have not, and will not, publicly discuss our plan for structural reform until it is formally approved. However, we can be clear that any plan we submit for approval will be wholly consistent with both the legal requirements and objectives of ring fencing.”
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