Banking experts have questioned Sir John Vickers’s claims that the Bank of England is not doing enough to shore up the British banking industry, saying more capital requirements for lenders would hurt the real economy.
Vickers, who led the Independent Commission on Banking (ICB), told the BBC this morning that the Bank “might want to reflect on the turmoil we’ve seen in banking shares” and reconsider its capital requirements.
The ICB originally recommended that Britain’s six biggest banks should have 3 per cent of extra capital in reserve compared to loans. The Bank is currently proposing a buffer ranging from 1 to 2.5 per cent for the so-called big six – and sent lenders a dovish message on future capital requirements in December when Bank of England governor Mark Carney said the big banks are “already most of the way there” in reaching their capital reserve targets.
Ian Gordon, head of banks research at Investec, told City A.M. it would be “unhelpful” if the Bank now changed course: “It would lead to slower balance sheet growth, reduced provision of credit to the real economy, lower returns to banks themselves and into that general downward spiral.”
The British Bankers' Association (BBA), meanwhile, said that banking regulation has "rightly undergone significant positive change, greatly improving the resilience of banks and the integrity of the banking system", with a spokesman saying the Bank is already "properly setting capital requirements in the context of the wider regulatory reform programme".