British Bankers Association concerned about capital requirements for large banks

In a statement on TSC 14 th report on Financial Crisis the Britisch Bankers Association is concerned about the suggested capital requirements for larger banks:

The Treasury Select Committee report investigates in some detail the regulatory aspects of the financial crisis. It makes a number of serious recommendations on how financial regulation can be improved. We are however, concerned about the cost and implications of the suggestion that larger banks should hold so much capital that it will be a “tax on size”. Such a proposal could have both an adverse impact on the economy in general and on services to customers. Careful consideration must therefore be given to all capital issues as banks cannot both hold more capital and lend more to their customers and at a competitive rate.

Similarly, although as the report says it is clearly sensible that banks have robust contingency plans, there will also be significant costs associated with 'living wills'. Any such proposal will need to be taken forward with care and requires all rounded and detailed consideration.

We are pleased to see the Committee's support for the need for an international perspective when fashioning the future shape of regulation and that it agrees that colleges of supervisors are a sensible way forward.

The attention of this report and commentary from others has focused on financial stability. The debate though has to be broader as too great a tension on stability will have the consequence of depressing economic recovery and impeding lending to business and to individuals. The BBA calls for this balanced discussion now to take place."

London, UK , July 31 th, 2009


Source: British Banker’s Association, London, UK, WWW.BBA.ORG.UK

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