Exodus fears as banks reshuffle

A SHAKE-UP at the helm of two of the UK’s largest banks is fuelling fears that the country could lose its top banking institutions overseas due to an over-zealous approach to regulation of the industry.

Barclays yesterday shocked the markets by appointing Barclays Capital boss Bob Diamond to run the business. Current chief executive John Varley will retire next year. The turmoil was compounded by the decision of HSBC chairman Stephen Green to step down before the end of the year end to take up the position of trade minister.

Analysts are warning the new chieftains make the prospect of a high-profile relocation for either bank look ever more plausible if the government decides to go ahead with legislation to split up retail and investment banking operations.

Diamond, a US-born investment banker, has fewer ties to the UK than his predecessor Varley and has been an impassioned defender of the integrated banking model. HSBC is yet to appoint a successor to Green, but a decision to install a chairman with substantial Eastern ties could prove crucial to future relocation plans. Current chief executive Mike Geoghegan, one of the top contenders for the role, relocated to Hong Kong earlier this year; while the man seen as the favourite to step up to the plate – Barclays non-executive director and ex-Goldman Sachs banker John Thornton – has extensive ties to Asia.

The government refused to comment on Diamond’s appointment yesterday, saying it was a matter for shareholders. But one government minister described the choice to the BBC as a “bank taken over by casino” while there was a feeling among anti-City forces in Westminister that the move was a provocation. Friends of Vince Cable – a critic of the City and of Diamond – said that he would be outraged by the move, while Lib Dem Treasury spokesman Lord Oakeshott said: “We have pledged to tackle unacceptable bonuses and to reduce risk: ‘Bonus’ Bob Diamond personifies both of those things.”

City figures warned the backlash will make an exodus even more likely. “Nothing preordains that these institutions are based in the UK – if they go on making it uncomfortable for banks to operate here, then politicians are going to get a rude awakening at some point,” one investment banker told City A.M. yesterday.

Tim Linacre, boss of stockbroker Panmure Gordon, added: “If banks are headed by those who have no particular emotional or business interest to keep their operations headquartered in the UK, that is bound to speed up discussions over potential moves overseas.

“I wouldn’t be raising the panic flags now, but if Bob Diamond were to look someone in the eyes and say he wants to move, it would take a brave man to call his bluff.”

In yet another move, Barclays chairman Marcus Agius is stepping up to chair the British Bankers’ Association.