Varley’s flexible views on Basel

By Felix Salmon
October 19, 2010
not-so-gentle shove:

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In the UK, it seems, the revolving door from big private banks into a grandee’s public-sector role doesn’t turn quite as smoothly as it does in the U.S. And so sometimes it needs a not-so-gentle shove:

John Varley, Barclays’ chief executive, has broken ranks with the rest of the global banking industry, arguing that the availability of credit should be unaffected by tough new capital rules for banks, which he regards as fair.

He praised both the “substance and timetable” of the Basel III proposals in an interview with the Financial Times, in comments that contrast starkly with other senior bankers…

Mr Varley’s stance is particularly surprising because Barclays is among the hardest hit of Europe’s banks by the Basel III changes to regulatory capital…

Mr Varley’s comments will fuel predictions that when he leaves Barclays, he will seek a significant role outside banking.

He has been linked, by those who know him, with possible roles at the Bank of England, in government or as chairman of a blue-chip company. To make the transition from lambasted banker to a role in public service or the broader corporate world Mr Varley needs a softer image, these people say.

There’s no doubt that if any bank will lend less as a result of Basel III, it’s Barclays: not only is it too big to fail, but it’s also more highly leveraged than most of its peers. Its risk-weighted assets are likely to rise substantially under Basel III rules and its capital commensurately.

Which means that Varley’s comments can be taken one of three ways.

Either Varley is right, in which case the Institute of International Finance and the banking lobby generally are wrong and are being unnecessarily alarmist.

Alternatively, Varley is wrong and is making these noises in a nakedly political attempt to ingratiate himself with public-sector technocrats.

Or nobody really knows what the truth is, least of all Varley himself and one’s view of Basel III is fundamentally a function of your job title, or what you’re hoping that your job title will be.

In any event, it would have been nice if Varley had made these noises back when he wasn’t a lame duck, when he actually had influence in the IIF and among banking-industry lobbyists. One thing you can be sure of: at this point, Varley’s views no longer carry any weight in the industry. As such, there’s frankly not much reason to appoint him to a senior position at the central bank.

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Comments
4 comments so far

In too big to fail, the Americans basically describe Varley as a “windbag” and not to be trusted.

Posted by MTinker1 | Report as abusive

In too big to fail, you were reading about a disgruntled bunch of Americans who didn’t get what they wanted – not surprising they were going to throw bricks at the nearest enemy, in this case John Varley. I would trust John a great deal more than Hank Paulson, that’s for sure.

And Felix, if you seriously think that John’s views are no longer significant to the banking industry, I think you’re in the wrong job! Wherever he moves on to after Barclays, they’ll be lucky to have him.

Posted by Eheyworth | Report as abusive

In too big to fail they described him thus before they didn’t get what they wanted…

Posted by MTinker1 | Report as abusive

Yes, but they wrote the book afterwards!!!

Posted by Eheyworth | Report as abusive
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