5.7.2011

By Simon Miller

Bankers have warned the Independent Commission on Banking (ICB) that it must consider impact on business and the economy as it decides on its final recommendations.

With the commission's final report due in September, the British Bankers' Association (BBA) said there was widespread concern in both banking and business circles that the costs and possible consequences of the ICB's proposals have not been worked through.

BBA chief executive Angela Knight said: "The ICB must do the analysis of the impact on the economy of their options before reaching its final decisions. And that analysis must be made public."

She added that there was already a major programme of new and different regulations and requirements, some of which was targeting exactly the same issues as the ICB proposals.

Kinght continued: "While we absolutely agree with the aims of reducing the chance of a bank failure, and of ensuring the taxpayer does not have to shoulder the risk, adding layer on layer of regulation will inevitably have an effect on businesses and individuals getting loans - and the price of those loans."

The BBA’s submission reports that key aspects of the ICB’s eventual recommendations are likely to overlap or be contrary to the international regulatory reform programme. Therefore when final decisions are taken it will be necessary to:

• take that international programme into account;
• consider the economic and other considerations;
• think through timing and implementation issues carefully, not least as the Commission and the international programme are not running to the same timetable;
• determine the further coordinating work to be undertaken by the Treasury, in consultation with the Bank of England and the Financial Services Authority; and
• assess the additional stability proposals in light of international changes to macro-prudential regulation and the requirements of the new Financial Policy Committee.

"Different banks have different structures. These may face varying degrees of difficulty with the ICB’s proposals. The Commission needs to bring forward some options and choices with a clear analysis of their impact on banks and on those who borrow," said Knight.