Building Societies Association director general Adrian Coles has told MPs that the proposed changes to financial regulation are anti-competitive and conflict with the Government’s commitment to sector diversity and the promotion of mutuals.
Speaking this week at a Treasury select committee evidence session, Coles (pictured) said the new regulatory framework will hit smaller firms with significant cost increases.
He said: “The regulation discussion document from the Treasury makes it absolutely clear there will be significantly increased running costs for small institutions. We can envisage a situation where there will be three regulators plus Europe, issuing consultation papers on the mortgage market, for example. It will not be an easy system to navigate for many firms.”
Coles said the extra regulatory costs would have to be passed on to the consumer.
British Bankers’ Association chief executive Angela Knight said: “Smaller institutions are quite significantly affected by the current environment, let alone the new environment which is ratcheting up costs and so limiting their ability to conform without themselves getting larger in some way.”
She added that the proposed seniority of the Prudential Regulatory Authority over the Consumer Protection and Markets Authority could make smaller institutions feel “distant” from decision-making.
Coles and Knight agreed that high quality supervisors are more important than the structure of regulatory bodies.
Knight said: “What makes future crises less likely is more than just changing the structure. It is greater liquidity in the system and by institutions, better management and risk control by the separate and individual major institutions, better co-ordination across borders and better supervision. Supervision is not just a set of rules and whether they are right or wrong, it is a far more holistic approach which needs to be taken.”