By Chris Dorrell
Sam Woods, chief executive of the main banking watchdog, argued that the competitiveness of the UK financial system will be advanced through the latest round of Basel reforms.
Set to come into force in the middle of 2025, the so-called Basel 3.1 rules intend to reduce variability in how banks calculate capital requirements, making them easier to compare globally.
In a speech set to be delivered in Mansion House this evening, Woods will say: “By maintaining confidence in our banks, Basel 3.1 will promote stable and reliable financing to the UK real economy. And by aligning with internationally-agreed minimum standards, our proposals also advance competitiveness by promoting confidence in the UK as a global financial centre.”
Although the rules are agreed globally, local jurisdictions have some flexibility in how to implement the regulations. Banks in the US have slammed regulators for opting for the most conservative interpretation of the rules among major economies, while regulators in the EU have been criticised for giving banks an easy a ride.
In the UK, Natwest chief financial officer Katie Murray told a conference last week that the overall package would be “very bad” for the UK economy while outgoing chair Sir Howard Davies said the reforms would put UK banks at a “competitive disadvantage”.
Woods stressed that the Prudential Regulation Authority (PRA) was “very mindful” of the impact on firms.
“We will be having very careful regard to the detailed evidence that firms have submitted as part of our consultation process,” he said.
Many firms have raised questions about the PRA’s treatment of SME lending, an issue that Woods referenced. Under the current arrangements unsecured lending will receive a more favourable treatment than secured lending.
Woods said he was confident the PRA would be able to adapt the reforms to reflect “legitimate concerns… while still ensuring that the core goals of the reform are achieved.”
