BofE's Jenkins accuses banks of lying to stave off reforms

A member of the Bank of England's new Financial Policy Committee (FPC) attacked British banks yesterday, accusing them of dishonesty and endangering the chances of economic recovery by lobbying against regulatory change.

Robert Jenkins said lenders were trying to quash reform by protesting that strengthening their balance sheets would force them to lend less money to support economic growth.

Mr Jenkins, pictured, said this was not true: banks could instead boost their capital by cutting bonuses, reducing trading with each other and by raising new equity and debt. "The latest lobby tactic is to convince pundits, public and politicians that encouraging prudence too soon will hit the economy hard," he said. "This is no longer amusing. This strategy is intellectually dishonest and potentially damaging ... because it promotes fear for an economy that the banks are there to serve and from which they draw their livelihood."

He rejected the banks' pleas that investors would not put up new equity to boost their balance sheets, saying: "The markets are not closed to viable banks. Their executives are closed to the need to pay the price necessary to the raise the funds needed. For the sound, well-run financial enterprise the money is there. It is just not there at yesterday's price."

Instead of complaining, the banks should make themselves safer because that is what investors want, added Mr Jenkins, a former executive at Citibank, Credit Suisse, F&C Asset Management and Combinatorics Capital.

The remarks were his latest attack since joining the interim FPC to represent buy-side investors.