One of Britain's most senior bankers yesterday launched an excoriating attack on the new bank regulator which will replace the Financial Services Authority within two years.
Peter Sands, the £5m-a-year chief executive of Standard Chartered, said he was "dismayed" at the way the new Financial Policy has defined its role. He accused the UK of taking a "we know better" attitude and having a "markedly different approach" to regulatory changes in other countries which have already proved effective.
Standard Chartered is headquartered in London but does almost all its business in emerging markets in Asia, the Middle East and India.
Mr Sands said: "It might not be obvious from the somewhat technical language, but in effect the FPC wants to control how much lending there is in every aspect of the economy. This reeks of Seventies-style quasi-nationalisation of the industry."
He added that although members of the FPC are "highly respected... none has run a lending bank". His attack comes just weeks after Hector Sants announced he is quitting as chief executive of the FSA. He was due to have been one of the senior members of the FPC under the Bank of England'sGovernor, Sir Mervyn King.
Mr Sants warned that if the FPC gets its way, investors will "run a mile" from putting their money in banks if it has control of the returns banks can make. He said: "Put bluntly, if investors can't be convinced that investing in banks will deliver appropriate returns, capital will be sucked out of the industry, causing credit availability to fall and the cost of credit to rise."
Mr Sands picked holes in the FPC's plans. These include not having any controls on lending on properties which has tended to be the trigger for most major financial crises. He said: "Virtually every country that has an effective macro-prudential framework deploys loan-to-value or loan-to-income limits to constrain lending on property."
Writing in the Financial Times, Sands concluded: "In the world of the FPC, it appears that governments, regulators and central banks are paragons of virtue, the private sector the source of all problems. Tell that to the people of Greece. Fiscal irresponsibility and loose monetary policy were important contributors to the crisis, alongside the fact that some banks did behave extraordinarily stupidly. To avoid further such crises, we need the FPC to be unblinkered and courageous, deliberate a nd thoughtful in action."
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