Treasury financial secretary Mark Hoban has warned the European Commission not to impose any rules which will undermine the ability of UK regulators to go beyond the capital requirements set out in Basel III.
The latest Basel accord originated in an agreement by the G20 and would set a minimum core tier-one capital requirement for banks of 7 per cent from 2019.
The rules will be applied in Europe through the capital requirements directive 4, currently being worked on by the European Commission.
The UK Government has raised concerns that CRD4 will impose “maximum harmonisation”. It says this will mean the Financial Policy Committee will not be able to go further than the rules in the directive and so will not be able to apply the higher capital requirements set out by the Independent Commission on Banking.
In a speech in Brussels last week, Hoban said being able to place higher requirements on banks is vital to reduce the need for recourse to public money if they fail and that “we must resist any attempts to unpick” the G20 agreement.
He said: “Jurisdictions must retain the right to apply higher levels of regulation to ensure financial stability in their own markets. This is particularly important for countries like the UK that are home to large global financial centres.”
He added that his position is backed by the International Monetary Fund, the European Central Bank and the European Systemic Risk Board.
Derbyshire Booth Financial Management managing director Greg Heath says: “Setting a maximum requirement is dangerous because it does not account for countries having to deal with bigger financial sectors which pose more of a risk.”