BBA warns on capital rules
THE Financial Services Authority (FSA) must produce a cost estimate and a timetable for the tightening of capital requirements on banks or risk damaging the UK economy, British Bankers’ Association (BBA) chief executive Angela Knight will warn today.
In a speech at the BBA’s conference on compliance and regulation, Knight will say that banks already have capital ratios of around eight per cent and could find themselves unable to lend if they are asked to build capital buffers even further.
“I know it’s unpopular to urge caution on regulators,” Knight told City PM, “but there does need to be a serious cost impact assessment study undertaken.”
“If you carry on ratcheting up capital regardless, there is only so much that can be raised and you get to a point where additional capital results in a reduction in lending,” she added.
She called on the FSA to publish a timetable for the implementation of capital requirements and also urged the regulator to wait for an international agreement before pressing ahead with the measures.
The FSA wants banks to build up extra capital buffers against trading books, increase capital cushions during good times and implement leverage ratio caps.