The scramble for capital
An uneven playing field
"There are an awful lot of questions and not many answers," says Patrick Buxton, head of the capital management strategy group at Citi.
A whole series of questions have been raised that still need to be resolved, he adds. "Is capital for micro-prudential or macro-prudential supervision? Or is it both? What element of capital needs to cover pro-cyclicality? What element of capital needs to be counter-cyclical? What is the future role of the ratings agencies? What is the role of remuneration? What should a bank’s trading risk be? What do we want to do to address that in a regulatory mix?"
All of these questions lead to the biggest one that policymakers, regulators and bankers are grappling with: can the authorities achieve a tougher regulatory environment? Some of these issues have been tackled and continue to be so in the various plans and proposals that have been published over the past year: the Turner Review, the De Larosière report, and pronouncements by the Basle Committee, the G20 and other bodies.
Bankers are naturally concerned about the consequences of any regulatory change. Take the implications of banks having to hold more equity as capital and the impact that has on their lending capacity.