I am grateful to City AM for reminding us that yesterday Barclays revealed a 55% tumble in its UK banking profits. Meanwhile its liquidity and capital surged to meet new regulatory requirements. It is now 20 times leveraged – the level banks averaged in the 1990s before Labour’s crazy experiment with more borrowing – down from 28 times.
Barclays has more than met the new need to hold more cash and to have more capital. It holds £650 million extra liquidity and has cut the size of its balance sheet. As the weaker state owned banks try to go the same way we should expect more trouble for people and businesses trying to borrow money, less economic growth, and higher prices for banks’ services.
All this is the direct result of disastrously lax regulation in the noughties, followed by much tougher regulation now we are in a financial hole. Boom and bust regulation is reinforcing boom and bust money policies.