UK’s changes to EU rules risk damaging economic growth1
26/01/2011

The economic recovery could be hampered if the UK moves too far ahead of the international consensus on banking reform, the British Bankers' Association has warned the Chancellor of the Exchequer.

The tendency of the UK’s rulemakers to add to EU decisions when implementing them into UK, imposing greater or more detailed requirements on the banking industry, risks tipping the playing field of global commerce in favour of our competitors, BBA chairman Marcus Agius has said in a letter to Chancellor of the Exchequer George Osborne.

In the letter, Marcus Agius states:

"This is most notable when the UK applies additional requirements to the agreed standards; when it implements them earlier than others; and when it does not use the flexibility the standards permit or not in a manner reflected elsewhere. 

"These are not just issues for banks; they have a direct impact on the provision and pricing of finance in the economy." 

The letter is accompanied by two reports prepared for the BBA by Freshfields Bruckhaus Deringer. "Bank of the Future" addresses the implementation of the G20's recent decisions across the UK, USA, Canada, France, Germany and Australia, and clearly shows the UK is well advanced in all policy areas. "UK Banking Regulation - Level Playing Field Issues" clearly highlights that it is in the detailed implementation of capital and liquidity rules that the real problems arise. This is where the cost of operating a bank is increased, impacting on the price and availability of loans.

The next step is for the Government and financial services industry to look again at the critical list of changes made, and to work quickly to level the playing field.

Notes to Editors

The full text of the letter by the BBA chairman to the Chancellor of the Exchequer is available below.

The reports "Bank of the Future" and "UK Banking Regulation - Level Playing Field Issues" are available below.