The British Bankers' Association (BBA) has warned the Government of the dangers in rushing through potentially ill-considered legislation in an effort to ensure there is no repeat of the "run" on Northern Rock.
Speaking from Washington, the BBA's chief executive, Angela Knight, said she feared the Government could endanger Britain's banking industry by acting too fast on plans to allow regulators to seize control of the deposits of stricken banks to protect depositors, as has happened in the US and Canada.
The BBA is making its views known in its submission to the Government on the forthcoming Banking Reform Bill, set in train in the wake of the credit crunch and Northern Rock crises. "We believe that the time-table is excessively aggressive, particularly with regard to banking insolvency arrangements and the special resolution regime," said Ms Knight.
"Banks are broad-ranging entities and they operate internationally out of the UK. To try to make major legislative changes by July 2008 is inappropriately fast and will not allow time for the very detailed working through that is required."
Ms Knight said she believed that many improvements could be achieved by the Financial Services Authority making better use of its "very extensive powers" and by the FSA, Bank of England and Treasury working together better through their "tripartite" arrangements.
She added: "There are some things that could be done quickly, such as giving the Bank of England legal powers for financial stability and allowing a greater degree of confidentiality when banks need to access its funds."
But she said the plan to allow regulators to take control of a bank's deposits under the special resolution regime and to introduce new insolvency laws could lead to unforeseen consequences. "We fear there could be a case of legislate in haste, regret at leisure."
A Treasury spokesperson yesterday insisted ministers were acting sensibly saying: "This is an evolution, not a revolution.
"In terms of regulatory reforms we have a three-month consultation and then there will be a parliamentary process. It is a consultative process.
"The consultation is ongoing and we look forward to receiving the BBA's proposals as we take stakeholders' views."Reuse content