Politicians must ensure that regulators do not heed pressure from banks to water down reforms intended to stop a repeat of the 2008 crisis, a Conservative MP has said.
Andrew Tyrie, who chairs the Treasury select committee, said new rules were needed because the biggest banks in the UK were still too big to fail, and they should be threatened with being broken up if they try to breach the new regime.
Following complaints by banks including HSBC and Barclays about the difficulties of implementing new regulations, Tyrie said: “The task of legislators now is to ensure that regulators do not inadvertently allow the reforms to be called off before they have even been implemented.
“As memories of the financial crisis begin to fade, the task of regulators will get more difficult,” said Tyrie, who also chaired the parliamentary commission on banking standards set up in the wake of the 2012 Libor rigging crisis.
HSBC has complained that requiring banks to ringfence their high street operations from their investment banking arms could leave it without enough control over its operations. Barclays is having difficulties finding a way to comply with the rules, which come into force in 2019.
Tyrie did not name any banks in his speech for the Centre for the Study of Financial Innovation, but said: “The awkward truth for some of the largest banks has been, and probably still is, that the huge amount of work involved in satisfying the ringfence requirements is forcing the boards of those huge institutions to identify in more detail what is really going on in them.
“Regulators have told parliament repeatedly that the UK’s major banks are not yet in a position to be ‘resolved’ – that is, allowed to fail – without the risk of taxpayer support. This is as unacceptable for the public finances as it is unsustainable politically. The taxpaying public’s tolerance of another bailout is low, to put it mildly.”
He said the ringfencing rules would be reviewed two years after the implementation date in 2019. “That review could recommend full separation of all banks. Banks need to be reminded that a review is coming,” said Tyrie.
guardian.co.uk © Guardian News & Media Limited 2010