Banks must be allowed to take risks if they are to step up to George Osborne's plans for a private sector-led recovery, Barclays CEO Bob Diamond told MPs this morning.
He told the Treasury Select Committee (TSC) the UK must hand the "mantle of growth" from the public sector to banking and the wider private sector.
The TSC evidence session is part of its inquiry into competition and choice in banking.
Diamond, who succeeded John Varley as CEO on 1 January on a reported £1.35m-a-year salary with a potential £8m bonus this year, told MPs poor risk management led to the failures of Northern Rock, RBS and Lloyds.
But he refused to accept that big bonuses combined with only limited personal liability for failures among bank staff lead to unhealthy risk-taking.
Banks' risk-taking is essential to maintain the recovery, he said.
"If there was something consistent with the failed banks it was poor risk management and the capacity to absorb losses.
"But we have to pass the mantle of growth to the private sector and to the banks. We need banks which are competent and willing to take risks to improve economic growth."
He praised Chancellor George Osborne and Prime Minister David Cameron for their programme of deep public sector cost-cutting which will see nearly all departments shrink by 25% over the next four years.
"The Chancellor and the Prime Minister have been very good at addressing some of the negative aspects around the deficit," he told MPs.
The former investment banker also said investment banking should not be separated from retail banking arms. He claimed Barclays is stronger because it combines the two in what is known as the Universal Integrated Banking Model.
UK regulation is a "concern" but Barclays has "absolutely no intention" of changing its London based, he said.
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