Banks accused of lying to stave off regulation

A member of the Bank of England's Financial Policy Committee yesterday attacked Britain's banks for dishonesty and endangering economic recovery in their lobbying against regulatory change.

Robert Jenkins accused the banks of trying to quash reform by protesting that strengthening their balance sheets would force them to lend less to support economic growth. Mr Jenkins said this was not true: banks could instead boost their capital by cutting bonuses, reducing trading with each other and by raising new equity and debt.

"The latest lobby tactic is to convince pundits, public and politicians that encouraging prudence too soon will hit the economy hard. This is no longer amusing. This strategy is intellectually dishonest and potentially damaging... because it promotes fear for an economy that the banks are there to serve and from which they draw their livelihood."

Mr Jenkins rejected the banks' pleas that investors would not put up new equity to boost their balance sheets.

He said: "The markets are not closed to viable banks. Their executives are closed to the need to pay the price necessary to the raise the funds needed. For the sound, well-run financial enterprise the money is there. It is just not there at yesterday's price."

Instead of complaining, the banks should make themselves safer because that is what investors want, Mr Jenkins added.

The remarks were the former investment manager and lobbyist's latest attack since joining the interim FPC to represent buy-side investors.

Mr Jenkins has already criticised the long deadline for implementing the Vickers reforms and poured scorn on banks that have stuck with return on equity as a measure for calculating bonuses. His confrontational style is at odds with those who have called for an end to bank bashing such as the CBI's director general John Cridland.

Drop in home ownership 'may help economy'

Lower levels of home ownership could be a national economic benefit, according to a member of the Bank of England's Monetary Policy Committee.

"Lower owner-occupation rates need not mean big welfare losses," David Miles, an external member of the MPC, told the Northern Housing Consortium in York yesterday. Mr Miles said the tax system is biased in favour of ownership because landlords pay tax on rental income while owner-occupied housing is exempt from capital gains. This, he said, has a tendency to make the owner-occupation rate "inefficiently high".

Mr Miles also argued that lower levels of home ownership could help reduce unemployment by making workers more mobile.

Ben Chu