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TSC member says bank capital rules may be ‘revisited’

London UK Parliament 480

Treasury select committee member Stewart Hosie has warned the banking reform bill will have to be quickly revisited if capital rules do not work.

The Government has rejected calls from Sir John Vickers and the Parliamentary Commission on Banking Standards to force banks to set aside a minimum of 4.06 per cent of capital, opting for 3 per cent in line with Basel III.

In its interim report, published in December, the PCBS said it was “essential” the ratio was “substantially” higher than 3 per cent as lack of capital was a “significant contributor” to the crisis.

But the Government says the higher minimum would have hit lower-risk lenders such as building societies hardest.

Nationwide claims it would have been forced to make cuts to its mortgage lending and shrink its balance sheet if the higher minimum was introduced.

Scottish National Party MP Hosie says: “There is a balance to be stuck by the rules being tough but with no unintended consequences, as warned by the building societies.

“We need to make sure it works but if it becomes clear these leveraging rates are not appropriate they need to be revisited very quickly.”

Banking consultant Mehrdad Yousefi says: “It is political goalscoring to suggest the leverage ratio should be 4.06 per cent because it would take longer for banks to start lending and delay an economic recovery.”

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