Taxpayers should not bail out banks that get into difficulties, according to Bob Diamond, the chief executive of Barclays.
Giving evidence to the Treasury select committee (TSC) this morning, Diamond said banks which run into trouble should be able to be wound down by the regulator.
He said: “No banks should ever be a burden on the tax payer. So we have to make the system safer and sounder and I think that is about risk management and the capacity to absorb losses.
“People talk about the need for regulators to be able to unwind an institution in short order and we agree with that ambition.”
Diamond said he recognised the benefits for the banks and the wider economy which came from the financial stimulus but said Barclays had not taken “a penny of tax payers money”.
Conservative MP Andrea Leadsom said Diamond was “in denial” as to the extent the taxpayer had supported the banking industry.
Diamond told MPs that Barclays had “no intention” of moving its head quarters from London though he stopped short of giving a “iron-clad guarantee”. (article continues below)
He said: “Let me be perfectly clear, We took our first deposit in the city of London in 1690, we have 320 years of history in London we have absolutely no intention of changing that.”
He was giving evidence as part of the committee’s inquiry into competition and choice in banking sector.
The majority of the two and a half hour session focused on bonuses. Diamond said Barclays recognised the need for restraint and that the bank paid bonuses for “performance not for failure”.
He warned reducing bonuses would have an effect on other services bank’s offer and the ability to be competitive in attracting staff.
He said: “We can’t isolate bonuses completely and pretend that action on that won’t have consequences on the rest of the business, we have to balance these things.”
Diamond waived his bonus in 2007, 2008 and 2009 but refused to take up a request from Labour MP John Mann to waive this year’s bonus saying that he has not yet been awarded one. Decisions over remuneration are to be taken by the bank in the next few weeks.
Diamond told the committee that shareholders have not asked specific questions about bonuses and that they would not be made aware of the bonus pool size or the allocation of rewards in advance of decisions being made.
Andrew Tyrie, the chairman of the TSC, said: “On bonuses they (shareholders) do not know what you are paying and they have not asked for it so they are incumbent, half asleep.”
He also told Mann he had not been personally approached by the Prime Minister or the Chancellor and asked to show restraint in the paying of bonuses, though other Barclays staff involved in negotiations with Government over remuneration have. Labour MP George Mudie said it was “disappointing” that he was not directly involved.