It is not only lenders that are calling for less stringent regulatory requirements.
The record of the Bank of England’s Financial Policy Committee meeting show its membership – made up of the same senior officials from the Bank and the Financial Services Authority that help set the regulatory agenda – was split over whether to lower capital and liquidity ratios.
This from the record:
The balance of opinion on the Committee was that it would be inappropriate in current circumstances for banks to reduce capital and liquidity ratios.
To be sure, none were siding with the banks’ view that Basel III is too tough. But some argued that reducing requirements for the time being – say from now until the economy recovers – may prop up growth by encouraging banks to lend.
This goes a lot further than the FPC’s statement, published last week, which said only that – if financial conditions worsen – it was “natural” that capital and liquidity buffers would be run down.
Unlike with the Monetary Policy Committee, we are in the dark about how individual FPC members vote. So it is impossible to tell how close, or otherwise, it was to recommending a lowering of capital and liquidity ratios.
But those reluctant to act were probably right. Read more