Barclays, Standard Chartered See $2 Billion Yearly Rules Cost

Barclays Plc (BARC) Chief Executive Officer Robert Diamond said the Independent Commission on Banking’s proposals will probably cost the bank “north of 1 billion pounds” ($1.5 billion).

“Ring fencing was not what we recommended,” Diamond told the House of Commons Treasury Committee in London. “We think it’s probably north of a billion pounds; does it get to 2 billion pounds? We’re not sure yet.”

Earlier, Standard Chartered Plc’s CEO Peter Sands said the bank levy and additional regulations in the U.K. would cost the lender “north of $500 million” a year.

John Vickers, 53, chairman of the ICB, recommended in September that banks insulate consumer units from investment banking as part of plans to increase stability in the financial system. The proposals may cost the industry as much 7 billion pounds, the ICB report said, and should be implemented by the government in 2019.

The cost will go on “funding, liquidity charges, capital charges” and is an annual cost, Diamond said. The majority will be paid by Barclays Capital, the bank’s investment banking unit, Diamond said. The London-based bank is Britain’s second largest by assets, with a market value of 20.9 billion pounds.

‘Substantial Drag’

Santander U.K. Plc Chief Executive Officer Ana Patricia Botin said estimated the cost would be closer to 10 billion pounds than 7 billion pounds in a letter to Parliament earlier this month.

“It’s a substantial drag,” Standard Chartered’s Sands told the committee.

The bank, which depends on Asia for a majority of its profit, faced calls from investors to consider moving after the British government imposed a bank levy last year to raise 2.5 billion pounds from lenders. The levy will cost it about $190 million this year, Sands said. The balance of the $500 million resulted from British “super equivalence,” he said.

“Our ability to grow and our ability to compete” will be diminished by new bank regulations, Sands, 49, said. The ICB’s proposals on loss-absorbing capital are “flawed in both maths and logic,” he told the panel of parliamentarians.

Even so, a relocation of headquarters away from London was not inevitable and moving would be a complicated distraction, the CEO said earlier.

HSBC Holdings Plc Finance Director Iain Mackay said on Nov. 9 that the combined cost of the bank levy and the ICB proposals on loss-absorbing bonds would be about $2.5 billion a year, a charge that was “too high” to ignore.

The ICB said in its September final report that banks’ retail units should have a “loss-absorbing capacity” of at least 17 percent to 20 percent.

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net. Gavin Finch in London at gfinch@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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