Diamond warns on lending costs

Companies and retail customers face rising borrowing costs in the wake of new European banking rules, one of the City's highest profile bankers warned yesterday.

Bob Diamond, the incoming chief executive of Barclays, told an industry conference that banks would struggle to provide necessary lending while still meeting the recently agreed Basel III regulations.

He said the debt and equity markets would become tougher, adding: "Clearly this presents a whole new challenge in how we serve our customers and clients – whether they're large corporations or retail customers seeking a mortgage, they'll be looking for access to cost-effective funding."

Mr Diamond, who currently heads Barclays Capital, the group's investment banking arm, was named earlier this month as the successor to group chief executive John Varley, who is to step down next year.