BOE's Jenkins Slams Bank Lobbying Against Reform
Published Wednesday, 23rd November 2011 03:31 am - © 2011 Dow Jones
--Financial Policy Committee member blasts bank lobbying against reform
--Robert Jenkins says banks' campaign against reform is "intellectually dishonest"
--Jenkins says banks should cut bonuses and raise cash, not crimp lending
(Rewrites first paragraph and adds quotes and detail from fifth paragraph.)
By Jason Douglas
Of Dow Jones NEWSWIRES
LONDON -(Dow Jones)- Banks can and should strengthen their balance sheets without curtailing lending, a Bank of England policy maker said Tuesday, in a speech castigating bank lobbying against financial reform.
Robert Jenkins, a member of the central bank's Financial Policy Committee, said that lenders' claim that tougher regulations aimed at making banks safer will hurt economies is "intellectually dishonest and potentially damaging."
"The truth is that banks can strengthen their balance sheets without harming the economy," he said, according to a text of his speech.
"They can do so by cutting bonuses, by curtailing intra-financial risk-taking and by raising term debt and equity. The markets are not closed to viable banks."
Regulators have demanded banks reduce their reliance on debt and hold more capital to absorb losses in an effort to prevent a repeat of the financial crisis that resulted in the collapse of investment bank Lehman Brothers in 2008.
These measures are included in an overhaul of global financial regulation known as Basel III. Regulators gave banks until 2019 to comply with the new rules.
But Jenkins said market pressure is forcing banks to act sooner, which has led banks to step up efforts to water down the new rules. But abandoning Basel would only further erode investor confidence in the banking system, he said.
"In pursuing its short-sighted approach the banking lobby is unwittingly making the case for more intervention in an industry which refuses to reform," Jenkins said.
The Bank of England's Financial Policy Committee is a new body charged with ensuring the stability of the U.K. financial system. It was created in a shake-up of U.K. financial regulation by Prime Minister David Cameron's governing coalition but currently has only an advisory role pending the passage of legislation giving it full powers in 2013.
-By Jason Douglas, Dow Jones Newswires; 44-20-7842-9272; firstname.lastname@example.org