BoE chief slams UK banks for lobbying
London, June 26, 2013
Bank of England (BoE) governor Mervyn King, making probably his final public comments before retiring, accused British banks of lobbying senior politicians to undermine a new system of financial regulation.
King said some banks had contacted the offices of Prime Minister David Cameron and Finance Minister George Osborne to protest against looming regulatory decisions.
"It's also important that banks don't leave conversations with the supervisors and feel the next step is to telephone No 11 or even No 10 Downing Street, and lobby officials or politicians to put pressure on supervisors to back down," King said, referring to Osborne and Cameron's addresses.
The BoE gained powers to supervise banks on April 1, and last week it ordered them to raise £13 billion ($20 billion) of extra capital and meet a new cap on lending ahead of international peers to curb risk in the financial sector.
This has prompted some bankers to complain privately that higher capital requirements and limits on leverage are hampering their ability to lend in support of government efforts to boost the fragile domestic economy.
King said that in the run-up to this decision, some banks - which he did not name - had asked top government officials to "put pressure" on the BoE to tone down its requirements.
"At least one conversation took place, that I know of. I think it is very important that this not be done," King said, referring to contacts between government and the BoE's new regulatory arm.
He was speaking to members of parliament's Treasury Select Committee, a body of legislators who monitor the finance ministry and have generally supported the BoE's tough stance on banks.
Separately, King also told legislators that markets had "jumped the gun" about when central banks are likely to start raising interest rates after the US Federal Reserve signaled a timetable for ending its bond purchases.
Yields on US and other government debt leaped last week when Fed chairman Ben Bernanke said the US central bank might start reducing its bond buying later this year and possibly end it by mid-2014.
"The Federal Reserve has merely said that the easing, in which it is still engaging, may taper at some point depending on economic conditions," King said.-Reuters