Former Barclays CEO Bob Diamond has remained relatively silent since last summer’s Libor scandal unceremoniously ousted him from the British banking giant.
But five years after the financial crisis, Diamond is joining the cadre of other former and current bank CEOs chirping in on whether the system is still prone to catastrophe.
Writing in the Financial Times, Diamond admits that “bank leverage — which was, we can now see, too high in the boom years — is now 50 per cent lower than it was pre-crisis.” Consumer protections and standardization in the derivatives market should also allay some fears, Diamond notes.
Still, on the buzz worthy too big to fail problem, Diamond says a threat remains. From the FT:
Political leaders, regulators and banks need to collaborate on the core issues in an internationally-co-ordinated effort to establish a robust resolution regime. Why is finding a solution to this problem so important? Without an international plan to wind down an important bank in an orderly fashion, political and regulatory leaders are compelled to create more rules — often to protect national and regional markets and economies.
So, first and most important, we must establish a global resolution regime that is rigorously tested — with ironclad protocols and agreements for implementation. Regulators across borders must have clear responsibilities and be prepared to act on them.
“Avoiding the next Lehman and solving ‘too big to fail’ is well within our reach,” Diamond concludes, “If regulators put in place a robust resolution regime, strong capital liquidity and leverage rules, and ensure consistency with other key regulations, including cross border derivatives and bank and market structure rules.”
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