Top Firm Urged To Spin Off Investment Bank

The Times reports that Barclays has been urged to spin off investment banking arm Barclays Capital in the wake of the outline banking reforms announced last week by President Obama.

The newspaper says that Barclays is likely to lose around $2.4bn in trading revenues if Obama has his way, and quotes an unnamed bank shareholder, who said: 'They should separate them. There are technical issues to be addressed, but these can be overcome'.

Other firms non-US firms likely to be materially affected by the President's proposals include BNP Paribas, Bank of Montreal, Credit Suisse, Deutsche Bank, Royal Bank of Scotland, Toronto Dominion Bank Group and UBS.

In the meantime, Bloomberg reports that, according to a note from JPMorgan analysts, Obama's plan to curb proprietary trading will cost Credit Suisse, Deutsche, Goldman, Morgan Stanley and UBS around $13bn in lost revenues.

And The Daily Telegraph reported that Thursday's announcement by the President is likely to go down in history as the '$30bn speech', as two minutes after he finished talking, $30bn had been wiped off the value of top US stocks.

The New York Times reports, however, that Goldman and Morgan Stanley may now elect to drop their bank holding company status in order to get around the proposed prop trading curbs. The newspaper say that Goldman is more likely to follow this path, as Morgan Stanley has been aggressively scaling back on risk and actively building its customer deposit base.

And The Times reports that Obama's proposals could hinder Royal Bank of Scotland's attempts to sell its 51% stake in trading commodities unit RBS Sempra to JPMorgan Chase. JPMorgan could now decide to walk away, or may want to return to the table to renegotiate on price.

Reuters reports that the European Union is unlikely to follow Obama's lead and introduce similar measures to reduce the size of banks and to rein in risk, although The Guardian reports that UK Prime Minister Gordon Brown may be likely to once again raise the idea of the so-called 'Tobin tax' on financial transactions.

Finally, The Guardian reports that UK City Minister Lord Myners is seeking an independent review of the investment banking industry and has called time on the 'greed is good' banking culture. One banker told Here Is The City: 'We in the City are looking forward to the independent review of Lord Myners and his policies, which now looks likely to take place in May. And we're pretty confident that the impending election will call time on this hopeless Labour administration'.

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