The banking industry shares the Independent Commission on Banking’s (ICB) aims of reducing the probability of bank failure in future, and of protecting customers, businesses and taxpayers if a bank gets into difficulty, the British Bankers’ Association (BBA) said.
If a bank is at risk of risk failing, it is essential that customers are protected, the supply for credit into the economy is retained and the bank can be unwound without involving the taxpayer, the BBA said in its response to the ICB’s proposals for the future of the industry. But it warns there is widespread concern in both banking and business circles that the costs and possible consequences of the ICB’s proposals have not been worked through.
BBA chief executive officer (CEO) Angela Knight said: “The ICB must do the analysis of the impact on the economy of their options before reaching its final decisions. And that analysis must be made public. There is already a major programme of new and different regulations and requirements. Much of this is targeting exactly the same issues as the ICB proposals. And while we absolutely agree with the aims of reducing the chance of a bank failure, and of ensuring the taxpayer does not have to shoulder the risk, adding layer on layer of regulation will inevitably have an effect on businesses and individuals getting loans – and the price of those loans.”
She added: “Different banks have different structures. These may face varying degrees of difficulty with the ICB’s proposals. The commission needs to bring forward some options and choices with a clear analysis of their impact on banks and on those who borrow.”
The BBA’s submission reports that key aspects of the ICB’s eventual recommendations are likely to overlap or be contrary to the international regulatory reform programme. Therefore, when final decisions are taken it will be necessary to:
- Take that international programme into account.
- Consider the economic and other considerations.
- Think through timing and implementation issues carefully, not least as the commission and the international programme are not running to the same timetable.
- Determine the further coordinating work to be undertaken by the Treasury, in consultation with the Bank of England (BoE) and the Financial Services Authority (FSA).
- Assess the additional stability proposals in light of international changes to macro-prudential regulation and the requirements of the new Financial Policy Committee (FPC).
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