City regulators have pledged not to give in to banks over new liquidity rules and to stop banks from lobbying politicians into watering down proposals.
Senior members of the Bank of England have brushed aside complaints from banks about new regulations designed to improve stability.
They are insisting that the latest measures, which require financial institutions to hold a 3% “leverage ratio” of assets against loans, is paramount to the stability of British banks, and should be implemented at the end of the year, five years ahead of the international deadline.
British banks have complained that the latest radical shift in the goalposts could deter them from lending at a crucial time for the economic recovery (read more).
Barclays and Nationwide have made the biggest inroads in net lending since the Funding for Lending Scheme began in August 2012. But this still only partially offsets the huge falls in lending posted by taxpayer-owned RBS and Lloyds.
(See our blog on the lending impact of the Funding for Lending Scheme.)
Nevertheless, the Bank of England has said that the two most proactive lenders are the only two to fall shy of the regulations, and senior officials are adamant that the institutions conform to the safety measures rather than pursuing backdoor tactics to have them reduced.
The current deputy governor of the Bank of England, Paul Tucker, told MPs that the rules needed to be implemented before the end of 2013 to reduce the exposure to risk of Britain's highly leveraged banks.
He described suspected political lobbying of regulators and politicians as "pointless" and "completely unacceptable", adding that regulators would not be deflected "one iota" from their goal.
Andrew Bailey, head of the Prudential Regulation Authority, said he would draw up rules for lobbying, amid concerns that underhand tactics and scaremongering are undermining the culture of transparency that regulators are seeking to improve.
Keith McDonald
Which4U Editor
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