Ex-FSA chief calls for massive increase in banks’ capital reserves
'It could take at least a generation to create a credible body'
The former chairman of the City watchdog last night called for banks to massively increase their capital reserves on the day plans for a new professional standards setting body were unveiled.
In a speech in Frankfurt, Lord Turner, who chaired the Financial Services Authority until its abolition in 2013, backed the argument that, in an ideal world, bank-capital ratios would be “as high as 20 per cent to 25 per cent” – more than twice current levels.
He warned that the economic danger posed by excessive credit growth is so great that it is “almost certain” banks should be forced to hold significantly more capital than at present.
Lord Turner noted the international Basel III rules can require banks to hold a counter-cyclical equity buffer of 2.5 per cent of their risk-weighted assets but said that this should be “much larger”.
The argument for hugely increasing the amount of capital banks hold has found favour with a number of central bankers, notably Sir Mervyn King, who made the case while in office as Governor of the Bank of England.
However, any such move would be sharply resisted by the industry, which has long argued that it would curtail banks’ ability to lend to businesses and fuel economic recovery.
Banks are hoping that the plans for a new standards body will improve a reputation that has arguably never been lower in the wake of the financial crisis and subsequent taxpayer-funded bailouts together with the escalating list of scandals thrown up in its wake.
Sir Richard Lambert, a former director general of the CBI, said there was a “strong case for collective action” among banks to improve standards.
And he took aim at “industry norms” that “have incentivised short-term revenue generation as opposed to the duty of care to customers”.
“So long as this is allowed to continue, banking will fail in its efforts to raise standards of conduct.”
The body he envisages would develop metrics against which banks could benchmark themselves and then report annually on progress. It would, he said, act as a “champion” of better professional standards in banking.
He also said it could validate training programmes and ultimately become a professional body for bankers potentially along the lines of similar organisations in accountancy or law.
Sir Richard said: “The objective is a measurable and continuous improvement in the conduct and culture of banks and building societies doing business in the UK. The credibility of the new body will be built on the independence of its board, and on widespread industry participation.”
However, Andrew Tyrie, chairman of the Parliamentary Commission on Banking Standards, warned that it could take years for such a body to become effective and urged rapid action in order to address his commission’s recommended reforms.
“This is a welcome start to a very long-term project. As the Banking Commission concluded, it could take at least a generation to create a credible, effective body,” he said.
“In the meantime, this work cannot substitute for the work of the regulators. The most urgent task now is for banks and the regulators fully to implement the proposals of the Banking Commission, including certification and linking reward to the maturity of the risk.”
- 1 Sainsbury's '50p challenge' poster telling staff to encourage customers to spend more placed in shop window instead of staff room
- 2 Five-year-old Iris Grace is raising awareness of autism through her extraordinary paintings
- 3 Isis an hour away from Baghdad - with no sign of Iraq army being able to make a successful counter-attack
- 4 Yes, the iPhone 6 is a miracle, but it's Apple's tax affairs that deserve a double take
- 5 Car tax disc changes: Two days to go - and they affect you much more than just not displaying a piece of paper
Isis could become 'world’s first truly terrorist state' and bomb UK with nuclear and chemical weapons, Theresa May warns
Car tax disc changes: Five facts you never knew about your (almost obsolete) tax disc
Five-year-old Iris Grace is raising awareness of autism through her extraordinary paintings
Car tax disc changes: Two days to go - and they affect you much more than just not displaying a piece of paper
Isis an hour away from Baghdad - with no sign of Iraq army being able to make a successful counter-attack
Isis, we are told, is a 'clear and dangerous threat to our way of life'. I’m sorry, but I just don’t buy it
Exclusive: 'Putin's Russia has been my biggest regret,' says Nato's outgoing Secretary General
The Osborne Ultimatum: Chancellor’s benefits freeze bombshell will affect ten million households
There’s no excuse for Dave Lee Travis’s behaviour, but we need to keep a sense of proportion
Should gay sex be illegal? 16% of Britons think so
Mark Reckless becomes second Tory MP to defect to Ukip in a month
- < Previous
- Next >
iJobs Money & Business
£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...
NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...
£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...
Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...