Diamond: Stable investment banking crucial to maximising scheme returns

UK - Schemes looking to maximise returns in a low interest rate environment must work closely with investment banks to boost member outcomes, Barclays chief executive Bob Diamond says.

Speaking on BBC Radio Four's Today programme, Diamond (pictured) said pension funds need to return about 7% to get the right result for members - but poor gilt returns and interest rates were making it hard for funds.

The Barclays boss said banks' ability to help pension funds find the right investments was a demonstration of his industry's social responsibility.

"Pension funds today need to get a return of about 7% and it's a big issue for the savers looking towards their pension funds when they retire," he argued. "And with interest rates and gilts at 2%, 2.5% how do they get that return? They look to banks to help them find that investment.

"So the importance of banks working closely with governments as they issue bonds to fund the deficit, working with pension funds to find the appropriate investments to get their returns at the right level, working with businesses to help them manage their risks of interest rates of commodities in order to raise funding and raise equity."

He also said no bank should ever be too big to fail but argued banks must by nature take risk.

He said banks should work to regain the public's trust because they play an important role in society.

Diamond said: "A vibrant banking community, working with a vibrant business community is going to lead to better economic growth and better jobs in the UK and to do that we need to restore trust in the banking system."

Diamond apologised to taxpayers for the mistakes of the past but argued banks were "safer and sounder" today.

He dismissed the claim that banks operate like casinos, arguing they work alongside investors like pension funds to determine the best strategy.

"We make markets in gilt-edged securities or US Treasuries and we help create a pool of investors who are there day in and day out to buy and sell the securities that are issued by the US or the UK in order to help fund the deficit.

"And by doing that we help reduce the interest rate, we improve the opportunities for a strong economy and I do find it unhelpful when people call this gambling or casino because these risks are taken alongside of our customers or clients whether they're pension funds, whether they're corporates or whether they're governments."