Senior Bank of England officials today delivered a stern rebuke to commercial banks that have been lobbying ministers to water down regulation of the sector.
“Of course it’s unacceptable, it’s also pointless” said Paul Tucker, the Bank’s Deputy Governor, speaking at a Treasury Select Committee hearing.
The former Bank Governor, Lord King, told the committee last week that banks had put pressure on both the Prime Minister and Treasury to persuade the regulator to drop its tough line on leverage and capital standards in the industry.
Andrew Bailey, the head of the Bank’s Prudential Regulation Authority, said that he had not personally been approached by ministers to water down demands, but he added: “These conversations did take place.”
Bailey warned that such covert lobbying of ministers was potentially dangerous. “The point is around transparency. It’s a better process if it’s transparent,” he added.
Martin Taylor, a former chief executive of Barclays who has been appointed as an external member of the Bank’s over-arching Financial Policy Committee, told the elect committee that when he was in charge at Barclays in the 1990s, he would never have dared lobby government on regulation.
“The Governor would have filleted me” he said.
Last month regulators told banks to put in place plans to increase their leverage ratios to 3% of assets by the end of 2013, prompting complaints that the Bank had drastically increased its demands and caught them off guard. But the officials told the committee that the new leverage target was in the pipeline for months. “The idea that it was a shock at the end of June isn’t something the committee should be taken in by,” said Taylor.
George Osborne is set to appoint one of the City’s oldest banks to help him decide whether to break up Royal Bank of Scotland. Rothschild is understood to have beaten off competition from Deutsche Bank and Bank of America Merrill Lynch. Rothschild declined to comment.
