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Diamond warns on new regulation

Thursday 15 December 2011 - by

Barclays chief executive Bob Diamond has warned that too little attention is being paid to the impact of new regulations as governments continue to focus on austerity measures.

Speaking in front of the UK parliament's Treasury select committee, Diamond called for "more balance" between the effects on economic growth and on enacting further regulation following the financial crisis.

However, he did claim that the bank is in favour of "strong regulation" eventually being put in place.

Highlighting the UK's position, Diamond argued that is critical that the country reduces its deficit in order to keep hold of its AAA rating to ensure it maintains access to borrowing on financial markets.

With the country decreasing its public spending - as governments all over Europe are also doing - growth will have to come from private sector investment, he said.

"I still worry that the regulators are in a position where the focus is more on [making us] safe and sound, which is more capital more capital more capital, less risk less risk less risk, and the impact that has on the real economy," he told the Treasury Select Committee on Wednesday.

"I do worry we are leaning too far on cutting your risk and increasing your capital, and that there is too little recognition on the impact of that on the real economy."

But he claimed that the bank had not lobbied to water down any proposed reforms, recognising that "strong banks want strong regulation".

It is in the bank's best interests to ensure that effective regulations are in place, he said, given the public outcry against the sector following the financial crisis.

"We recognise that the best thing we can do is have a strong, tough regulatory environment and we want that," he continued.

"[But] you do have to make a balance. We can take capital levels so high that banks can't lend and obviously you'll get safe banks but you won't get an economy."

Diamond highlighted the country's proposed 'ring-fencing' put forward by the government-appointed Independent Commission on Banking and the UK bank levy as requirements likely to constrain business lending.

Also speaking at the committee, Standard Chartered's chief executive Peter Sands warned that policymakers risked imposing an "avalanche" of new regulatory measures that could cut growth.

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