She says at present regulation consists of many requirements that simply don’t work right, don’t fit together, are not coherent, have an unanticipated impact or are simply wrong.
She says: “Let me give you two examples. The new capital rules penalise trade finance. This is surely not right as financing trade is a fundamental requirement for economic recovery.
“The government is urging us to lend even more to small business. Meanwhile SME lending is elsewhere being classified by policy makers as high risk and so making it more expensive to lend and expensive to borrow.”
She says there is a policy conundrum that needs to be resolved.
She adds: “The UK has already put a regime in place early as Basel III is not even beginning implementation until 2013.
“As to the content of the buffer, covered bonds are allowed in the EU, and Freddie Mac and Fannie Mae in the US. However in the UK we do not allow even high quality securitisations into the buffer.
“This is not just a technical issue it is fundamental to increasing the provision of mortgages and other forms of lending when the demand for loans picks up in a world where banks need more and more expensive capital.”