Despite objections from Barclays and Nationwide, city regulators have largely ignored their opposition to the upcoming liquidity regulations. The regulators argue that implementing these changes quickly is crucial, ideally before the global 2018 deadline.
Paul Tucker, the deputy governor of the Bank of England responsible for financial stability, has deemed the banks’ objections “totally unacceptable.” He stressed that the regulators would not back down from their position. Tucker has told MPs that these regulations need to be put into effect promptly to reduce risk exposure in highly leveraged UK banks.
Nationwide and Barclays have been actively opposing these proposals, calling the fast-tracked implementation a “shock.” They claim it could harm their financial positions and restrict their lending capabilities. Mervyn King, the former governor, revealed this opposition during a meeting with MPs. The banks even tried to appeal to the Treasury and Number 10 to delay the regulations until 2015. Barclays hinted at potentially cutting back on lending to households and businesses if the rule is enforced this year.
A ratings agency has reported that UK banks are “adequately capitalized to absorb expected losses in both standard and severe stress scenarios.”
The opposition began when US regulators decided to enforce the law—setting new borrowing limits and higher reserves—well before the Bank for International Settlements’ deadline. This decision has caused unrest among many businesses, who argue that the proposed strict lending ratio would put tougher restrictions on US bank leverage. Federal Reserve Governor, Dan Tarullo, mentioned that “the Basel III leverage appears to be set too low to serve as an effective balance to the internationally agreed risk-weighted capital measures.”
Banks’ complaints include being pushed towards safer levels of capital and lending. Andrew Tyrie, head of the Treasury select committee, has voiced concerns that banks might use their power for personal gain. Andrew Bailey, head of the Prudential Regulation Authority (PRA), confirmed that banks had approached George Osborne, but emphasized that the PRA’s independence remained intact under the chancellor’s oversight. Bailey noted the importance of maintaining a clear and accountable process.
Former Barclays chief, Martin Taylor, commented that the banks are making a fuss because the PRA and Andrew Bailey are doing their job, and some might say it’s overdue.