Marcus Agius, chairman of the British Bankers’ Association, says he is concerned that regulators are imposing capital requirements on banks that are too high.
Speaking at the BBA conference in London today, he says capital is undeniably important for making banks safer.
But says: “Some regulators seem to believe that even more capital is the solution to every regulatory problem.
“Carried too far, this thinking would have profoundly negative consequences and not just for the banks.
“At the extreme, banks would become over-capitalised and therefore unable to earn sufficient rate of return on that capital.
“This would make them unattractive investments for private investors, This of course would be self-defeating because what we all are striving for is to ensure that public money is never again needed or used to bail out the banking system.”
He says his concerns are not frivolous and the current depressed share prices of Western banks reflect the nervousness and uncertainty of investors as to where regulatory reform will end up.