Bank of England policymaker Robert Jenkins has attacked the way banks have been lobbying to try and prevent or delay regulatory reform of the sector.
Jenkins, who is an external member of the Financial Policy Committee, believes that the latest “short-termist” lobbying tactics by banks – in warning that introducing the Independent Commission on Banking’s proposed reforms too quickly will damage the economy – is both “intellectually dishonest and potentially damaging”.
Speaking at the third Gordon Midgley memorial debate in London yesterday, Jenkins said the banks were wrong to suggest that the reforms will force them to reduce lending levels.
He said: “What you would achieve is further erosion of confidence in the banking system. And it is potentially damaging because it promotes fear for an economy which the banks are there to serve and from which they draw their livelihood. For the truth is that banks can strengthen their balance sheets without harming the economy. They can do so by cutting bonuses, by curtailing intra-financial risk-taking and by raising term debt and equity. 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.”
Jenkins says there is no need to delay the reforms to 2019, the date the Government has given as a “back-stop” to introduce the reforms, which would align the new rules with Basel III.
He said: “I know that not all bankers agree with these tactics. They should stand up and distance themselves quickly. For in pursuing its short-sighted approach the banking lobby is unwittingly making the case for more intervention in an industry which refuses to reform.”
Chancellor George Osborne recently told MPs the majority of the ICB’s proposals will be implemented through fresh legislation rather than “shoehorned” into the draft Financial Services Bill.