Banking Reform: ‘Draconian’ UK Reforms Will Force Lenders Into Crisis



Banking crisis

Banking crisis

Senior politicians and financiers have warned that the recommendations from the Independent Commission on Banking (ICB) may put Britain’s banks in a horrible situation. The publication of the final report by the ICB will be released in around two weeks time.

New banking crisis

Many of the markets indicators are leading to a warning of new banking crisis and bankers and politicians are worried that taking drastic action right now could spell disaster.

The chairman of the Treasury Select Committee, Andrew Tyrie MP, has expressed to the Daily Telegraph that he was concerned that forcing banks to take on added expensive funding could damage them in a time when many do not have the resources to deal with the extra burden.

Mr Tyrie has stated that the present moment is not the optimum time to put into place liquidity requirements that are above those internationally proposed.

He went on to say that most banks are facing increasing pressure due to the shrinking of the financial market conditions in the months just passed, and this required the full effort of the Bank of England’s Financial Policy Committee (FPC). The FPC will need to take a stance on whether or not it should use one its macro prudential tools to deal with the matter.

The current share price situation for British banks is not good, with many still sitting at their two-year lows despite two days of continuous rises. Moreover, the cost of insuring their bonds against the event of default reached its year high during last week.

“Confidence is everything”

“At a time when no one is taking risk, it is the government’s job to give people confidence, so that banks lend money. The UK lives off London and would be so much poorer without it” said Crispin Odey, a veteran London-based fund manager.

John White, a senior fund manager at hedge fund GLG said: “Confidence is everything and at this stage we need clarity from policy makers and regulators that red tape and draconian regulation are off the agenda.”

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