Banks call on Government to rethink radical reforms

Pressure is growing on the Government-appointed Independent Commission on Banking to ease off on banking reform, with leading accountants and banking organisations calling on the Government to "think again" and avoid "systemic reduction" in bank profitability.

The implication is that such damage would also restrain the banks' ability to lend and sustain investment, the mortgage market and economic recovery. Some in the industry have recently talked of a "mortgage famine". The accountancy and consultancy firm KPMG says that regulatory pressures are building on banks across the world and that, if there is no change to their business models, new measures affecting bank liquidity will result in a "systemic reduction" in profitability. This will affect tax revenues, pension-fund income and, potentially, the overall level of employment in the financial-services industry.

KPMG's report finds that European and US banks face the most intense regulatory pressure and that liquidity is the highest pressure area for banks as a whole globally. It adds that the new liquidity requirements from the Basel Committee on Banking Supervision – the so-called Basel III rules – could "permanently depress margins". Liquid funds will have to be held in low-risk, low-return assets such as government bonds, further reducing profitability.

Privately, regulators doubt whether the damage to the banks will make any material difference, and, even if it did, it would be entirely justified given the costs their mistakes have imposed on the wider economy.

The Independent Commission on Banking, chaired by Sir John Vickers, will today face fresh calls to "change course" as it prepares to hear evidence in Edinburgh. The Chartered Institute of Bankers in Scotland (CIOBS) will give warning that any reforms to the industry will fail if they are not combined with "a firm commitment to embedding a culture of high ethical, professional and technical standards amongst bankers throughout the industry".

The Commission is considering whether to break up Britain's banks, particularly the hold of the "big four" – HSBC, Lloyds, Barclays and Royal Bank of Scotland – on retail banking.

Simon Thompson, the chief executive of CIOBS, said banks had failed during the financial crisis because of "a culture characterised by a lack of prudence and inappropriate risk-taking".

He continued: "Regulators ... will not be able to design a regulatory regime that alone can prevent banks failing. It is not the case that as long as rules are followed and capital requirements met, nothing can go wrong. We must also develop a new culture which embeds the high ethical, professional and technical standards on which banking depends."

Scotland's reputation for financial competence was badly shaken during the crisis given the Scottish roots of the two biggest UK bank failures: Royal Bank of Scotland's near collapse, and Lloyds Banking Group requiring state aid because of its decision to takeover HBOS.

Life and Style
Customers can get their caffeine fix on the move
food + drink
Life and Style
techCould new invention save millions in healthcare bills?
Sport
David Moyes gets soaked
sport Moyes becomes latest manager to take part in the ALS challenge
Voices
Mosul dam was retaken with the help of the US
voicesRobert Fisk: Barack Obama is following the jihadists’ script
PROMOTED VIDEO
Arts and Entertainment
Flat out: Michael Flatley will return to the stage in his show Lord Of The Dance
danceMichael Flatley hits West End for last time alongside Team GB World champion Alice Upcott
News
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
i100
Life and Style
Black Ivory Coffee is made using beans plucked from elephants' waste after ingested by the animals
food + drinkFirm says it has created the "rarest" coffee in the world
Arts and Entertainment
Loaded weapon: drugs have surprise side effects for Scarlett Johansson in Luc Besson’s ‘Lucy’
filmReview: Lucy, Luc Besson's complex thriller
Arts and Entertainment
Jamie T plays live in 2007 before going on hiatus from 2010
arts + entsSinger-songwriter will perform on the Festival Republic Stage
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Life and Style
food + drinkThese simple recipes will have you refreshed within minutes
News
Jermain Defoe got loads of custard
i100
News
peoplePamela Anderson rejects ice bucket challenge because of ALS experiments on animals
Arts and Entertainment
tvExecutive says content is not 'without any purpose'
News
A cleaner prepares the red carpet for the opening night during the 59th International Cannes Film Festival May 17, 2006 in Cannes, France.
newsPowerful vacuum cleaners to be banned under EU regulations
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant - IT

£20000 - £25000 per annum + OTE £40,000: SThree: Computer Futures has been est...

Generalist HR Administrator, Tunbridge Wells, Kent - £28,000.

£25000 - £28000 per annum: Ashdown Group: Generalist HR Administrator - Tunbri...

Application Support - Enterprise Java, SQL, Oracle, SQL Server

£45000 - £55000 per annum: Harrington Starr: A well-established financial soft...

Service Desk Analyst (Graduate, Helpdesk, Desktop, Surrey)

Negotiable: Harrington Starr: Service Desk Analyst (Graduate, Helpdesk, Deskto...

Day In a Page

Air strikes? Talk of God? Obama is following the jihadists’ script

Air strikes? Talk of God? Obama is following the jihadists’ script

The President came the nearest he has come yet to rivalling George W Bush’s gormless reaction to 9/11 , says Robert Fisk
Ebola outbreak: Billy Graham’s son declares righteous war on the virus

Billy Graham’s son declares righteous war on Ebola

A Christian charity’s efforts to save missionaries trapped in Africa by the crisis have been justifiably praised. But doubts remain about its evangelical motives
Jeremy Clarkson 'does not see a problem' with his racist language on Top Gear, says BBC

Not even Jeremy Clarkson is bigger than the BBC, says TV boss

Corporation’s head of television confirms ‘Top Gear’ host was warned about racist language
Nick Clegg the movie: Channel 4 to air Coalition drama showing Lib Dem leader's rise

Nick Clegg the movie

Channel 4 to air Coalition drama showing Lib Dem leader's rise
Philip Larkin: Misogynist, racist, miserable? Or caring, playful man who lived for others?

Philip Larkin: What will survive of him?

Larkin's reputation has taken a knocking. But a new book by James Booth argues that the poet was affectionate, witty, entertaining and kind, as hitherto unseen letters, sketches and 'selfies' reveal
Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?

Waxing lyrical

Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?
Texas forensic astronomer finally pinpoints the exact birth of impressionism

Revealed (to the minute)

The precise time when impressionism was born
From slow-roasted to sugar-cured: how to make the most of the British tomato season

Make the most of British tomatoes

The British crop is at its tastiest and most abundant. Sudi Pigott shares her favourite recipes
10 best men's skincare products

Face it: 10 best men's skincare products

Oscar Quine cleanses, tones and moisturises to find skin-savers blokes will be proud to display on the bathroom shelf
Malky Mackay allegations: Malky Mackay, Iain Moody and another grim day for English football

Mackay, Moody and another grim day for English football

The latest shocking claims do nothing to dispel the image that some in the game on these shores exist in a time warp, laments Sam Wallace
La Liga analysis: Will Barcelona's hopes go out of the window?

Will Barcelona's hopes go out of the window?

Pete Jenson starts his preview of the Spanish season, which begins on Saturday, by explaining how Fifa’s transfer ban will affect the Catalans
Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape