Breaking up banks is not the answer, says Agius

THE chairman of Barclays Bank told an audience in Manchester yesterday that banks had made “serious mistakes” but breaking them up was not the answer.

Speaking at a lunch organised by pro.manchester, the group for members of the city’s professional sector, Marcus Agius said the future security of the economic system depended on better risk management rather than breaking up those banks considered too big to fail.

Reformers have called for large banks to be broken up to avoid the need for massive bail-outs in the future and to make them easier to manage.

“The model banks have reflects their clients’ needs,” said Mr Agius. “Banks have evolved in response to what clients want. That’s a sensible way for any business to behave. Size and structure are not key issues but effective risk management is key to the financial stability of the banking system.”

He added: “A well-run bank is a bank that understands the risks it is taking and manages those risks. Banks made some very serious mistakes – there was no bank that did not make serious mistakes, but there were also mistakes in public policy, monetary policy, regulation and so on.”

He admitted banks needed to regain the trust of their clients and continue to extend credit to businesses to enable them to grow and create jobs.

When asked if he thought banks should heed calls to rein in the bonus culture Mr Agius said banks needed to balance the need to attract the best talent with the views of the public.

“We have to pay the market rate at the same time as showing sensitivity to what the outside world feels on the subject,” he said.