* Barclays boss says has options to reach 3 pct leverage
* Warns lending may suffer if it has to hit target quickly
* Bank of England says no plan that restricts lending will
* Barclays targets 14 pct RoE for investment bank
By Steve Slater
LONDON, June 28 Barclays warned on
Friday it may have to cut lending if it is forced to act quickly
to meet new financial targets imposed by regulators, but the
Bank of England said it will not accept any plans that hurt
The central bank's Prudential Regulation Authority (PRA)
last week surprised investors by telling banks they needed to
have a 3 percent leverage ratio, and said Barclays fell short
with a ratio of only 2.5 percent after adjustments.
The ratio measures capital against total loans and some
bankers argue it penalises low-risk, high-volume businesses like
trade finance and mortgage lending.
The PRA gave Barclays and mutual Nationwide, the only other
major lender to fall short, until the end of July to say how
they will improve.
Barclays Chief Executive Antony Jenkins said on Friday
Barclays would achieve the target by 2015 under its existing
"We have options to accelerate with minor income effects,
but an aggressive acceleration requirement from the PRA would
require additional actions," he said, adding that might include
squeezing "lending to the UK and other economies, which is
something we want to avoid."
That creates a dilemma for the regulator, which is trying to
encourage banks to lend to revive economic growth. Barclays and
Nationwide were the only two firms whose net UK lending was more
than 1 billion pounds ($1.5 billion) in the first quarter.
A Bank of England spokeswoman said in a statement: "We have
made it very clear that any plans that restrict lending to the
economy will not be accepted."
Jenkins said he expected to reach agreement with the PRA in
the next four weeks.
"Given our starting point, we expect the July discussions
will center on possible acceleration," he told analysts and
investors before the start of a presentation.
Jenkins said the leverage ratio was a "crude" measure and
should only be used to supplement a capital measure based on how
risky assets are perceived to be, or risk-weighted assets (RWA).
Barclays said in its presentation its investment bank plans
to continue to shrink and reshape to improve returns and cut
risk, and estimated the unit's risk-weighted assets would drop
to 210-230 billion pounds by the end of 2015, from 257 billion
at the end of last year.
The investment bank contributes the bulk of Barclays'
profits, but the business has come under fire for creating the
aggressive risk-taking culture which bosses say they are trying
to rein in.
The investment bank is targeting a return on equity of 14
percent by 2015, excluding its legacy assets. That is above the
group's RoE target of 11.5 percent.
The investment bank has retrenched in mainland Europe and
Asia and said its main focus is on the United States and
Britain. Its advisory business has cut staff and monthly costs
by 15 percent in the year to the end of April. In commodities
and equities, staff cuts were 18 percent and 16 percent