Despite objections from Barclays and Nationwide, city regulators have largely disregarded their opposition to the forthcoming liquidity regulations. According to the regulators, it’s critical that these changes be implemented as quickly as possible, preferably ahead of the 2018 global deadline.
The deputy governor of the Bank of England, Paul Tucker, who oversees financial stability, has described the banks’ objections as “totally unacceptable.” Tucker remains firm, underlining that regulators won’t waver in their stance.
Tucker has expressed to MPs that the regulations should be executed swiftly to mitigate risk exposure in highly leveraged UK banks.
Raising complaints
Both Nationwide and Barclays have actively fought against these proposals, dubbing the expedited implementation as a “shock.” They argue it could potentially harm their financial position and limit their lending capabilities.
This opposition was exposed by Mervyn King, the former governor, who addressed the contention with MPs in a recent meeting. The opposition included attempts to appeal to both the Treasury and Number 10, in hopes to delay the regulations until 2015.
Barclays even hinted they might restrict lending to households and businesses should the rule be enforced this year.
It’s been reported through a ratings agency that UK banks have been “adequately capitalized to absorb expected losses in both standard and severe stress scenarios.”
A spokesperson from City Index recently remarked, “The UK’s services sector has also seen recent growth, suggesting the pace of recovery could accelerate in the upcoming months.”
US compliance
The backlash initially sparked when US regulators revealed they would enforce the law—setting new borrowing limits and higher reserves—well before the Bank for International Settlements devised deadline.
This decision has roused discontent amongst numerous business fronts, with many arguing that the proposed strict lending ratio would impose tighter restrictions on US bank leverage. Federal Reserve Governor, Dan Tarullo, stated, “The Basel III leverage appears to be set too low to serve as an effective balance to the internationally agreed risk-weighted capital measures.”
Banks’ complaints have extended to the issue of being pushed towards secure levels of capital and lending. Meanwhile, Andrew Tyrie, head of the Treasury select committee, voicing concerns that banks might exploit their power for their personal gain.
Andrew Bailey, the head of the Prudential Regulation Authority, confirmed that banks had approached George Osborne, but emphasized that the PRA’s autonomy remained under the chancellor’s control.
Bailey stated, “We are certainly aware of discussions between banks and officials and ministers. My concern is that we’re striving to establish a transparent process that includes accountability.”
Former Barclays chief, Martin Taylor, also shared his view, averring, “The banks are making a fuss because the PRA and Andrew Bailey are doing their job—some might argue it’s about time.”
