By Steve Slater
LONDON, Oct 22 (Reuters) - Barclays should be ableto overcome difficulties it is having in separating its domesticretail banking business from the rest of the bank under new UKrules designed to make banks safer, its chairman said onThursday.
Britain's major banks have to separate, or "ring-fence", their domestic retail units by 2019, and sources have saidBarclays has had the most trouble setting up its structure.
The bank is reported to be in talks with the regulator abouta transitional arrangement to make its ring-fenced bank asubsidiary of the rest of the group, because it is concernedabout the credit rating of the remaining non-ring fencedbusiness. That is because it has a bigger investment bank thanother UK banks.
"We're perfectly comfortable we can create a viable entity... we may have to make a few adjustments but it's perfectlypossible," Barclays Chairman John McFarlane said on Thursday.
"We've got to be very careful to make sure we don't createprudential issues in the remaining bank in creating aring-fenced bank. That's the balance we're trying to find," hetold reporters on the sidelines of a British Bankers'Association conference.
McFarlane said the bank had "a number of options" and hadnot made its final submission to the regulator yet "because thisis a difficult issue".
Banks have until January to submit their plans to theregulator.
How to structure the bank is one of the big challengesfacing Barclays' new chief executive, who has not yet beennamed. Sources have said that is likely to be former JPMorganinvestment bank boss Jes Staley.
"It's very unusual for an appointment to be played out fullyin the media when we haven't made a decision ... the ball is notfully in our court," McFarlane said.
When asked if hiring a former U.S. investment banker wouldsend out a message that Barclays will rebuild its investmentbank, McFarlane said: "If you're talking about Jes Staley, he isnot an investment banker. He ran the investment bank, but he's aclient guy."
Barclays, like many European banks, is reducing the size ofits investment bank in an effort to increase its profitability,and McFarlane said he was confident Barclays can have a morefocused business "that is capable of producing decent returns".
He said European investment banks could merge in the futureto have the scale to compete with Wall Street's powerful firms.
"There may be an opportunity for individual investment banksto combine to try to create a more global platform."
"That's a theoretical point and I doubt Barclays would be aplayer in that, but on the other hand you should never ruleanything out," McFarlane added. (Reporting by Steve Slater, editing by David Evans)