Harder than cracking Diamond

The resignation of the Barclays chief, if welcome, should not be allowed to obscure the need for fundamental reform. And Britain - that large hedge-fund with a small country attached - is deeper in need of it than anyone else.

Tony Curzon Price
Tony Curzon Price
3 July 2012

OK, feel a bit pleased that he's gone. But don't feel relieved. The worst thing that could happen now is that Diamond's resignation works as he intended it to work.

Here, in his own words, is why he is resigning:

"The external pressure placed on Barclays has reached a level that risks damaging the franchise - I cannot let that happen."

That is, it has nothing to do with having done anything wrong. Indeed, there is a tone of definace in his resignation. He is resigning despite his glorious history at the bank: "I joined Barclays 16 years ago because I saw an opportunity to build a world class investment banking business. Since then, I have had the privilege of working with some of the most talented, client-focused and diligent people that I have ever come across. We built world-class businesses together and added our own distinctive chapter to the long and proud history of Barclays. My motivation has always been to do what I believed to be in the best interests of Barclays."

I don't think there is a moment of irony or jest - none intended, anyway - in his statement that "[we] added our own distinctive chapter to the long and proud history of Barclays." A distinctive chapter that the Quaker bank might one day want to write in penitent tone.

So as everyone of good sense savours a moment of satisfaction, remember the deep problem that we face, and let's hope the resignation does not have the intended effect of taking the heat off Barclays or finance. A mere resignation shouldn't let us forget quite the size of the task ahead or the enormity of the hole we're in.

A hole which to me is best illustrated by this graph:


The UK's financial sector has notched up about 6 times GDP of debts (the height of the green bar), effectively guaranteed by the British taxpayer, who was never asked to take on this risk. A sizeable chunk of that debt - by far the largest - is due to Barclays.

Britain really did become a large hedge-fund with a small country attached to it. No country in the world faces as large an imbalance as we do, and rebalancing will take much more than resignations. Or public inquiries. The Vickers recomendations are a start. But only a start. The whole way in which society allocates capital to projects needs rebuilding, and the sheer amount of human talent devoted by Britain to supposedly productive financial markets needs to be reduced. And not one resignation at a time.

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