Barclays chief says a crisis is likely — potentially in credit

By BLOOMBERG

DAVOS • Barclays plc’s top banker said it’s “more than likely” there will be another financial crisis, but his industry is unlikely to be the trigger this time.

Instead, Jes Staley said he sees potential shocks from a seize-up in credit markets, given where risk in the system has gone since banks shrank their balance sheets. A hard Brexit is another risk.

“This time, there’s a chance the banks will be the buffer, as opposed to the cause” of the crisis, Staley, who has been the British bank’s CEO since 2015, said in a Bloomberg Television interview with Francine Lacqua from the World Economic Forum in Davos, Switzerland.

He cited the flow of credit into collateralised loan obligations, and also pointed to the lack of high-yield debt issuance in December.

“If that had extended into the first quarter, that itself would have created a potential credit shock,” he said. “There were a lot of companies that need to roll them over.”

As well, “there is an extremely high amount of debt in sovereign balance sheet” on the back of historically low interest rates, he said.

This year’s Davos is a buzz with discussion about European bank mergers, but Staley poured cold water on the idea as a panacea for the industry.

Investment bank mergers “do not work”, said Staley, a former senior executive at JPMorgan Chase & Co. He cited JPMorgan’s crisis-era deal to acquire Bear Stearns. “I was there.” Dealmaking takes banks’ focus away from focusing on technological innovation, he said.

Staley said Barclays is already big enough to compete with the big Wall Street firms and that he’s confident in the bank’s strategy.