Hans-Joerg Rudloff, the chairman of the investment bank Barclays Capital, has criticised as "populist" the plan of Barack Obama to restrict operations of US lenders. Mr Rudloff acknowledged in the Swiss newspaper Sonntag yesterday that the financial services industry was on the threshold of major change. But he said the tone of the US president's appearance last Thursday, when he announced a clampdown on the scope and size of big US banks, did not fit with attempts to forge dialogue between business and government.
"It can only be regarded as a populist diversionary tactic after a huge setback for the Democratic Party," he said. The head of the investment arm of the British banking group said the proposals to fence off different parts of the banking business and limit the size of big banks were "vague", poorly thought out and hard to implement. "We banks are conscious that new regulation will be aimed at better protecting savings and deposits. Banks would thus be obliged to speculate less," he said. "However, that doesn't in any way mean that one should simply pull regulations from the last century out of mothballs."
The US proposals have been compared with the 1933 Glass-Steagall Act, which prohibited commercial banks from underwriting corporate securities or acting as brokerages. It was repealed in 1999. Mr Rudloff said banks would have to change their culture. "We are at the beginning of a new chapter in the history of finance and certainly face a restructuring of the whole industry." Mr Obama's plan to limit the size of banks and risky trading has spooked investors, but analysts say it would have only a marginal effect on institutions such as JPMorgan Chase, Bank of America and Citigroup, and would be hard to enforce.
It is not clear whether the rules he proposes would reduce the risk of taxpayers having to bail out another big bank. The White House has yet to provide details of the plan. Attention has centred on Mr Obama's effort to bar the biggest banks from doing what is called proprietary trading. That is when banks use their own money to make high-risk trades. If those trades go bad and a bank goes under, taxpayers could be liable. Fearing the plan might reduce bank earnings, investors reacted by dumping financial stocks at the end of last week.
"We've been a world leader in financial services, and we need to be very careful about doing something to undermine that," said Edward Yingling, the president and chief executive of the American Bankers Association, adding that his members were "very concerned" about it. * with Agence France-Presse and Associated Press