Despite complaints by Barclays and Nationwide, naysayers to the new liquidity laws have been effectively ignored by the city regulators. The regulators insist that the new measures must be put into practice as soon as possible, ideally long before the global deadline of 2018.
Paul Tucker, the deputy governor of the Bank of England, holds responsibility over financial stability, and has called protests by the banks “completely unacceptable” and that regulators will not budge from their position.
Tucker has spoken to MPs, saying that the laws should be implemented quickly to help reduce the risk exposure in the UKs leveraged banks
Nationwide and Barclays have both campaigned heavily against these suggestions and described the fast-tracking as a “shock” as it would purportedly damage their finances and lending opportunities.
This protesting was revealed by the former governor Mervyn King who discussed the issues with MPs in a recent meeting. The lobbying included attempts to appeal to the Treasury as well as Number 10 in an attempt to put off the laws until 2015.
Barclays even went so far as to suggest they would limit household and business lending should the law be enforced this year.
“UK banks are described by the ratings agency as having been “sufficiently well capitalised to absorb expected losses from both our central and adverse stress scenarios”.
“The UK’s services sector has also been growing in recent weeks, indicating the pace of the recovery could be set to step up a gear in the coming months.” Commented recently a spokesperson from City index
The backlash began as the US regulators announced their decisions to implement the law, which will give new rules on borrowing levels and higher reserves, well before the deadline which was created by the Bank for International Settlements.
The move has annoyed several heads of business, with many claiming the promised strict lending ratio would put a tougher cap on leverage for US banks. Dan Tarullo, the Federal Reserve governor, has said: “The Basel III leverage seems to have set too low to be an effective counterpart to the combination of risk-weighted capital measures that have been agreed internationally.”
Complaints by banks have included the issue of forced movements towards safe levels of capital and lending. Meanwhile, head of the Treasury select committee Andrew Tyrie has expressed concern that the banks are taking advantage of their power for their own advantages.
The head of the Prudential Regulation Authority, Andrew Bailey, also confirmed that banks had approached George Osborne, though the PRA’s independence was under the control of the chancellor.
Bailey said: “We are certainly aware that there are conversations that happened between banks and officials and ministers. The thing that concerns me is that we are trying to build, frankly, a transparent process that has accountability in it.”
The formed Barclays chief, Martin Taylor, has also voiced his opinion, saying : “The reason the banks are squawking is that the PRA and Andrew Bailey are doing their job, and you might say about time too.”