Banks warn regulatory crackdown could stifle UK recovery

Bank chief says sector faces mounting costs and rules that stop it lending

Britain's banking sector last night fired a warning shot across the bows of the Treasury, urging the Chancellor not to put the UK's financial services sector at a major competitive disadvantage with new regulation that could even choke the economy's recovery.

Angela Knight, chief executive of the British Bankers Association, warned that new rules planned in the wake of the credit crisis threatened to leave the UK's financial industry poorly placed to compete on the world stage – and were a major threat to the UK's return to economic health.

Ms Knight also urged politicians and regulators to end the squabbling over who should be responsible for different areas of financial supervision.

The BBA's warning comes as banks ready themselves for a White Paper on regulation, which is due to be published within the next week. The Treasury's proposals are at the heart of a rift between the Chancellor, Alistair Darling, and Mervyn King, the Governor of the Bank of England, who remain at odds over how to improve supervision of the City.

The BBA said there was a danger that banks would be caught in the middle of the row, as well as by the public clamour for action against those considered culpable for the worst financial crisis the world has seen since the Great Depression.

The worst-case scenario, Ms Knight warned, is that new requirements on banks to hold more capital and maintain better liquidity severely constrain the sector's ability to lend, a problem the both the OECD and the Bank for International Settlements said yesterday was already threatening a sustainable economic recovery for the UK.

"The more capital and liquidity that a bank has to hold, the less they are able to lend," Ms Knight said. "We cannot both hold it and lend it."

Bankers are also concerned that in a bid to appease public anger over the crisis, the Government's politically troubled ministers will go further than other authorities in cracking down on the sector.

"These new requirements will inevitably result in a significant increase in costs for banks operating within the UK," Ms Knight said. "If the UK goes ahead with liquidity requirements in advance of other countries, then it will put this country, our centre, at a competitive disadvantage."

Ms Knight added that the regulatory hurdles faced by banks are likely to be augmented both nationally and internationally. "While supporting the [European Union's] proposal for better cross-border co-ordination on systemic issues and between the many regulators, there is little doubt that greater centralisation, more new directives and amendments to old ones are flowing fast from this Commission and may well flow faster still from the new one," she said.

"These proposals need to brought forward from a base of clear logic and not from either prejudice or the simple desire of the EU to be seen to be doing something."

Ms Knight's comments, which came in a speech to the BBA's annual dinner at the Mansion House in London, reflect the increasing nervousness with which leading banks are studying proposals for regulatory reform, both from the Government and the Opposition.

Those nerves will not have been steadied by an intervention from Lord Mandelson, the Business Secretary, who addressed the same dinner last night, warning that there has never been "such a sense of distrust and anger between the financial sector and the rest of the economy".

Lord Mandelson warned the BBA that the Government believed its members had to do more to lend to both businesses and the mortgage market. "Credit must be made available – and not just available, but reasonably priced," he said.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Life and Style
tech
Arts and Entertainment
Rocky road: Dwayne Johnson and Carla Gugino play an estranged husband and wife in 'San Andreas'
filmReview: In the face of all-round devastation, even Dwayne 'The Rock' Johnson appears a little puny
Arts and Entertainment
Bright lights, big city: Melrose Avenue in Los Angeles by dusk
books
News
i100
Sport
Harry Kane makes Paul Scholes' Premier League team of the season
footballPaul Scholes on the best players, managers and goals of the season - and the biggest disappointments
News
i100
News
ebookA unique anthology of reporting and analysis of a crucial period of history
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

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor
The ZX Spectrum has been crowd-funded back into play - with some 21st-century tweaks

The ZX Spectrum is back

The ZX Spectrum was the original - and for some players, still the best. David Crookes meets the fans who've kept the games' flames lit