Bankers warn regulators not to tie their hands
The head of the British Bankers' Association today warned of the costs of over-regulation and the risk of UK banks operating at a disadvantage to European peers
Firstly, the balance between the capital requirements of UK banks and those of banks in other countries needs to be monitored to ensure those in the UK are not at a disadvantage to their international peers, Knight warned, noting that decisions made by the Financial Services Authority means UK banks are already holding more capital than is required by Basel II standards.
Second on Knight’s list are the socio-economic consequences. “We cannot use the same money twice,” Knight said, referring to the limits placed on lending by having to hold more capital and liquidity. Therefore a balance must be struck between sensible insurance against the risk of bank collapse and the need to help individuals and businesses weather the recession, Knight said.
And thirdly, changes need to take place on a coordinated international basis whereby regulations are interpreted and applied in a similar fashion and on a similar timescale across borders, with the first priority being recovery from the recession.
“The industry accepts we need to change our national requirements, the European framework and the international standards,” Knight told the conference. But she also highlighted that “if the UK goes ahead with liquidity requirements in advance of other countries then it will put this country, our centre, at a competitive disadvantage.”
Knight added that following the recent Banking Act, there remains uncertainty regarding the separate responsibilities of the three forces: the Bank of England, the Treasury, and the FSA. “The industry sees as the key point that…there is clarity of who does what, a focus on seamless co-ordination, a no surprises relationship within the tripartite and appropriate actions taken when necessary and in a manner that engenders trust and confidence in the system.”
“If an industry is straight jacketed it cannot serve its customers or the economy well,” Knight said.
Following last night’s pre-conference dinner, Knight told the International Banking Conference in the City of London this morning, which was attended by key figures from within international banking, UK and European regulators and members of British Parliament, that banks are facing up to change but lawmakers and regulators need to take care that, in the rush to ensure there is no future banking crisis, the industry is not so hamstrung it cannot do its job.
