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Clued-up regulator urgently required
In its wisdom the Basel Committee on Banking Supervision wants banks to hold more capital as part of an exercise in strengthening the resilience of the sector.
But surely the answer is to stop banks doing stupid things rather than to make them hold more capital because they do stupid things. In fact, the committee now seems poised to implement a banking model that increases risk and cost.
If banks have to hold more capital they will need to make profits over and above those needed to satisfy shareholders. This surely means they will have to embark on risky, high margin business and hope it doesn’t go wrong.
And where are building societies in all this?
The committee is thinking of giving societies a special dispensation, letting them hold less capital than banks. Presumably this is because we’re less risky, more prudent and more sensible than our banking cousins.
At first glance this looks like a step forward, recognising that societies don’t sit comfortably in a higher capital requirement regime.
But, on reflection, why are we on the radar at all? It’s time to put some clear blue water between societies and banks. We should be regulated by people who understand what they’re doing - and I’m not talking about the Financial Services Authority.
FSA mandarins would spoil any progress which is why I’m counting the days to the general election and hopefully a Tory victory.
THE MUTUAL CRUSADER
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