- Its believed regulators want to make sure the UK has its own investment bank
- With the exception of Barclays, the major banks in the City are US institutions
- Barclays is trying to bolster defences against activist investor Edward Bramson
Meeting: Barclays chief Jes Staley
The Bank of England could block demands from activist shareholders at Barclays to shrink or spin off its investment banking division.
Bosses at the lender believe regulators at the Bank of England will resist such calls because they want to make sure the UK has its own home-grown investment bank.
With the exception of Barclays, the major investment banks in the City are US institutions, including Goldman Sachs.
Regulators are thought to be keen to avoid total dominance by Wall Street players.
Barclays is trying to bolster its defences against activist investor Edward Bramson, who has built up a 5 per cent stake.
Insiders believe its status as a globally significant financial institution – one which is monitored very closely because it is so big it is deemed a potential risk to the whole system – may act as protection against Bramson.
Bramson reportedly wants Barclays to wind down its fixed income trading division, saying it is not profitable enough given the amounts of capital the bank must set aside to operate in the area. But Barclays believes the division is critical to maintaining its heft in investment banking.
There were reports last week that Barclays might even merge with Standard Chartered to head off Bramson. Experts said regulators are unlikely ever publicly to spell out their position on retaining ‘British’ investment banks, but that they were worried about the situation.
A senior regulatory lawyer said: ‘When it comes to doing deals you need underwriting capacity. If you are only relying on the Americans, they might want to just put their capacity towards US investments they understand better.’
The Bank of England could block demands from activist shareholders at Barclays to shrink or spin off its investment banking division
That would mean companies being unable to get finance from the capital markets and being forced to rely on more expensive loans instead, the source said.
Sources close to Barclays insist that any regulatory support for the bank’s investment division would never amount to a blank cheque.
The bank is wrestling with different options for dealing with Bramson, without knowing exactly what his intentions are.
Despite a ‘cordial’ meeting between chief executive Jes Staley and Bramson earlier this month, it is thought the activist investor listened and asked questions about the bank’s plan rather than spelling out an alternative.
Barclays is a much bigger firm than F&C Asset Management and Electra Private Equity where Bramson has launched shake-ups. The Bank of England, Barclays and Bramson declined to comment.