Newspaper article The Evening Standard (London, England)

US War on Wall Street Sees Bank Shares Dive

Newspaper article The Evening Standard (London, England)

US War on Wall Street Sees Bank Shares Dive

Article excerpt

Byline: Hugo Duncan

BANKING shares across Europe tumbled today as Barack Obama's declaration of war on Wall Street spooked investors.

Barclays and Royal Bank of Scotland (RBS) were among the biggest losers in London, while Societe Generale, UBS, BNP Paribas and Deutsche Bank fell on the continent.

The FTSE 100 index was down 78.26 points to 5256.84 after dropping more than 85 points last night. The Dow Jones Industrial Average was down 30.98 at 10,358.80, adding to yesterday's 213-point rout.

It came amid fears the President's proposals will hit European bank earnings in the US and could be mirrored here. Obama called for banks to be banned from betting on markets with their own money -- known as proprietary trading -- and running hedge funds and private equity groups.

Alistair Darling, the Chancellor, distanced himself from the plans, but Shadow Chancellor George Osborne suggested that the UK could follow suit if the Conservatives win this year's general election.

Barclays shares fell 24p to 259p and RBS was down 2.92p to 32.4p on speculation that the two banks could be forced to split their traditional retail operations from their investment banking arms. Analysts warned that this would leave them vulnerable to takeovers by European rivals if less draconian measures are taken on the continent.

Both Barclays and RBS said they had little or no exposure to hedge funds or private equity and insisted they were not involved in proprietary trading.

Banking analyst James Hamilton, of Numis Securities in London, said: "Banks have constantly told the markets they have little to do with 'prop' trading but that is a bare-faced lie."

Shares in interdealer broker Icap and London Stock Exchange also fell on the prospect of a loss in trading volume and revenue if prop trading is banned. Icap was down 32.1p to 393.6p and LSE dropped 35p to 659.5p.

City analysts said there was little detail in the Obama proposals and that it was hard to tell what impact they would have on UK banks.

Simon Maughan of MF Global said: "It looks like regulation by the mob. How serious the reforms are going to be we might take with a pinch of salt, but the risk is that we now have a shadow hanging over us. …

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