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AS REGULATORS FINE-TUNE the newly increased capital requirements and leverage ratio limits they will shortly be imposing on the financial services industry, bankers fret that regulators will go too far, pile up new requirements higgledy-piggledy and so limit banks’ capacity to lend into the hoped-for economic revival. There are study groups at the Financial Stability Board, the Basle Committee on Banking Supervision and the IMF working on every aspect of the new regulatory framework – with one glaring exception. No one is preparing an analysis of the total impact of all the suggested new regulations on the size and constitution of the world banking system’s combined balance sheet (see The future of banking: Banking's next top model, Euromoney, September 2009).
Paul Tucker, deputy governor of the Bank of England, who has been tasked since March this year with identifying potential vulnerabilities of the banking system and ensuring its resilience, nods vigorously when Euromoney puts this to him.
He is well aware that regulators themselves might be one potential risk to the system.
Although he declines to be drawn on regulators’ own discussions of this or to suggest any body or venue for undertaking an official end-impact study of all the proposed new rules, he suggests that "there is in fact quite a strong appetite within the official sector to consider precisely this as the transition issue is recognized".
