Staley Sees Model for Policy Makers in Carney’s Focus on ProfitBy
Carney’s comments on rates, capital encouraging, Staley says
Staley hopes other regulators turn attention to profitability
Jes Staley, the Barclays Plc chief executive officer who has blamed regulation and low interest rates for helping to push European investment banks to “the brink,” has found a policy maker who understands: Bank of England Governor Mark Carney.
The central banker acted in a “sensible way” by keeping banks’ profitability in mind as he cut interest rates in response to the nation’s Brexit vote, Staley told investors at a conference in New York. Carney, 51, who also heads the Financial Stability Board, has signaled that the era of boosting banks’ capital requirements is coming to an end while also arguing in favor of keeping interest rates above zero.
“We’re very encouraged by what Governor Carney has said,” Staley, 59, said. “We do hope that regulators are going to shift their focus from levels of capitalization in the banking industry to levels of profitability in the banking industry.”
Staley is the latest bank executive to speak out in what has amounted to an industry campaign to convince European politicians and regulators that proposed further changes to capital requirements will suffocate banks and imperil lending and growth. Regulators say they are simply fine-tuning the current rules, as part of global efforts to avoid the bank collapses that spurred the economic slowdowns central banks are still battling.
The BOE changed the calculation of Barclays’s leverage ratio, allowing it to exclude 70 billion pounds ($93 billion) of U.K. treasury debt, as part of efforts to stimulate the economy, Staley said. The calculation adjustment would enable the bank to borrow more, helping preserve its profitability as it passed along lower interest rates.
“That’s a direct statement to Basel almost as it much as it was to the United Kingdom economy,” Staley said. “Very importantly for a governor of a central bank, he said that the profitability of the U.K. banking system is important.”
A combination of new rules, record-low interest rates and the costs arising from past misdeeds has placed many European investment banks “at the brink” and allowed American firms to become dominant, Staley said in a speech in Brussels in May. The lenders have lost about 20 percent of their market share across the continent in the past decade, while U.S. firms have boosted their share, he said.
“If you’re too aggressive on monetary policy, you damage your financial system,” Staley said Monday. “That may be dragging economies more than the incentive that you hope lower interest rates will provide to consumers.”
— With assistance by Stephen Morris