RBS chief warns against over-regulation

Royal Bank of Scotland's chief executive, Stephen Hester, has warned that over-regulation threatens his bank's recovery.

Mr Hester said yesterday that apart from risks to economic recovery, the major dangers for his nationalised bank's shareholder return target were from regulation. In a presentation, he said tougher requirements on risk-weighted assets and retained equity threatened his goal of 15 per cent returns by 2013. He also singled out the UK's "hawkish" position on rules for systemically important financial institutions and "trapped" capital and funding costs if the Government splits investment and retail banks into subsidiaries.

The Bank of England rate setter David Miles has said big banks should hold double the new 7 per cent minimum of shareholders' equity against their loans. Lord Turner, the FSA chairman, has supported the idea.

Mr Hester also said he expected two interest rate rises this year and that those moves would boost the bank's net interest margin.