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NatWest chairman Sir Howard Davies has called on UK regulators to take a more bank-friendly approach to setting capital requirements rules that would take into account “legitimate national interests”.
Bank of England regulators should “carefully” monitor the fierce U.S. backlash against the capital increase before finalizing their own version of the latest global rules, Davies said on Tuesday.
The Federal Reserve’s proposals for the final package of Basel reforms call for a 16 percent increase in the capital of U.S. banks, prompting veteran JPMorgan Chase CEO Jamie Dimon to ponder whether his regulators “want banks can ever be invested again.”
Goldman Sachs CEO David Solomon has also condemned the moves, and a U.S. financial lobby group has launched a campaign calling on regulators to halt the reforms that would otherwise “weigh our economy for years to come.”
Speaking at a BoE event, Davies said he hoped the central bank’s Prudential Regulation Authority would “watch this debate carefully before finalizing our rules.”
“Other countries are keenly aware of the impact of the Basel Accords on the unique circumstances of their own banking markets. Just think of the excitement that Germans are making when SME loans are treated more strictly [ . . ] There are legitimate national interests at stake.”
His comments come as banks face a difficult backdrop ahead of the so-called endgame of post-crisis capital requirements. Rising economic risks and volatile financial markets are overshadowing banks’ complaints about excessive conservatism and overly strict regulations.
The British government retains a 38.6 percent stake in NatWest after a tax rescue at the height of the financial crisis.
The BoE event was designed as an opportunity for regulators and industry to highlight the PRA’s controversial new secondary mandate to promote competitiveness and growth.
Davies made no mention of the debanking scandal at NatWest’s elite private bank Coutts, which led to the resignation of its chief executive Dame Alison Rose in July.
Davies, who will step down as NatWest chairman in April, said the Bank of England’s (BoE) plans to adopt the global package of capital rules for banks were already more punitive than the EU’s, putting UK banks at a “competitive disadvantage”. would provide their banks with closest neighbors. He said he hoped regulators would have a “strong justification” for their actions.
The PRA is expected to publish its final rules by the end of the year.
The BoE’s core belief is that competitiveness and growth are underpinned by higher standards, not by reducing capital burdens. It is committed to improving operational efficiency and responding to the industry’s innovation efforts.
Davies said: “We cannot assume that the large institutions on which the system is built can withstand ever-increasing capital requirements and increasingly costly consumer-focused interventions.”
“As chairman, I spend more time than most with investors and am very concerned that the authorities are not paying enough attention to their opinion of the sector’s investment viability,” he added.
The UK and EU’s decisions to stop paying dividends during the Covid pandemic have had a lasting damaging impact on the sector, he said.
The septuagenarian was chairman of the British Financial Conduct Authority from 1997 to 2003. The now-defunct Financial Services Authority, which was widely criticized for its lax approach in the run-up to the financial crisis, had a competition mandate.