"Too tough" banking regulation will put a "drag on economic recovery" and cost upwards of 10 million jobs globally, the world's leading bankers have warned.
The Institute of International Finance(IIF) yesterday launched a determined backlash against national governments who want to "gold-plate" the new Basel III regulations with "arbitrary constraints". The Washington-based body warned against unilateral actions to impose on banks fresh levies or even tougher capital requirements, or to bring forward the implementation of Basel III, which is not scheduled to be fully in force until 2019.
Such moves, it said, will add to the cost of raising capital in the financial system, which will in turn meanhigher costs for households and businesses, less corporate lending, and less credit for international trade.
The IIF represents 420 of the largest financial institutions in the world.
Deutsche Bank chief executive and IIF chairman Josef Ackermann said an "overreaction" by national regulators would jeopardise lending to the real economy: "There can be no doubt that reforms will produce a drag on economic recovery, and this means that jobs that should be created and that need to be created may not be created," he said.
Peter Sands, chief executive of Standard Chartered, added that "the impact on the real economy could conceivably be as large or greater than our original assessment" of a loss of about 10 million jobs. "The stakes are hard to exaggerate," he said.
The IIF's move comes at a time when concern about a "jobless recovery" is intensifying. Some 30 million jobs globally have been destroyed in the recession. The bankers are also signalling resistance to moves to break up the biggest banks. Mr Ackermann stated that "the focus shouldn't be on penalising firms just because they are big". He said that all they wanted was a "level playing field", based on Basel III.
However, new regulatory reform proposals continue to be generated. Also in Washington, another organisation, the Group of 30, chaired by Paul Volcker and including the Governor of the Bank of England, Mervyn King, wants governments to speed up the introduction of "macro-prudential" polices.
The aim is to prevent a repeat of the exponential and unsustainable growth in derivatives seen in the boom decade that led up to the credit crunch.Reuse content