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LONDON: Barclays bank chief executive John Varley on Tuesday said that too much new red tape in the banking sector could increase the cost of credit and adversely affect the economy.
His comments came as Britain's financial watchdog announced the departure of chief executive Hector Sants, who has overseen plans for large-scale reform of the banking sector following the global economic crisis.
"The economy depends on banks being prepared to take risks and lend," Varley told a panel of lawmakers.
"Swamp them with capital requirements and they will not be able to step up to the plate," he told parliament's Treasury Select Committee.
Barclays has successfully avoided state control, unlike rival British banks that were beaten by the global financial crisis and bailed out by the taxpayer.
Varley told lawmakers that a return to financial health in the banking sector was a "precondition of health in the real economy.
"Banks have got to be able to take the baton, got to be prepared to lend."
The comments come amid widespread public anger about the controversial issue of bonuses at banks that were bailed out by governments around the world.
Many critics blame the banking sector's bonus culture for encouraging excessive risk-taking and helping to tip the world economy into recession.
Reforms, they argue, should included a wholesale tightening of regulations to curb risk-taking, especially on pay and bonuses, so as to avoid a repeat of the crisis.
"If we look at the sector as a whole, trust has broken down between the banking sector and the public," Varley said on Tuesday.
"I think we will be judged on two things, one is how we lend and the other is how we pay," he added.
Meanwhile, Britain's Financial Services Authority said Sants would leave the FSA in mid-2010, as expected, after three years as chief executive.
The FSA said had not yet decided on a replacement, amid uncertainty over the organisation's own future.
Britain's main opposition party, the Conservatives, are proposing to either abolish or radically reduce the responsibilities of the FSA if, as opinion polls suggest, it wins a general election that is due by June.
Responding to criticism that it should have had in place tougher measures that could have prevented or lessened the fallout of the financial crisis, the FSA last August unveiled a new code of practice for the banking industry.
Among the initiatives has been a call to force banks to spread payment of two-thirds of bonuses for senior employees over a three-year period. - AFP/de
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