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British Bankers' Association warns against overly heavy regulation after credit crisis

British Bankers' Association warns against overly heavy regulation after credit crisis

The British Bankers' Association said Tuesday it supported tighter regulation in the wake of the global credit crisis, but warned that an overly heavy hand could dampen Britain's competitiveness.
The BBA, which represents 230 banks from around 60 countries that operate in Britain, also said it will increase its scrutiny of banks that contribute to the setting of Libor, its global benchmark for the cost of borrowing.
BBA chief executive Angela Knight said the organization broadly welcomed proposals from the government to tighten the regulatory framework, but warned it would be a complicated task.
"Three sets of rules will be two sets too many for the international industry," Knight said at the opening of the BBA's annual meeting in the City of London.
"What we do here in the U.K. must match others ... maintaining competitiveness is essential to the U.K. industry."
The BBA is holding its first annual meeting against the backdrop of the subprime lending crisis and the resulting credit crunch, which has shattered confidence within the industry and seen billions wiped off the value of banks' risky mortgage-backed assets.
The lending freeze led to the collapse and subsequent nationalization of mortgage lender Northern Rock while other banks, including the Royal Bank of Scotland PLC and HBOS PLC, have resorted to multibillion-pound share sales to strengthen their balance sheets.
The financial crisis has also made banks unwilling to lend to one another, increasing the cost of borrowing set by the BBA _ the London Interbank Offered Rate, or Libor.
The BBA acknowledged that "as the credit crunch has stressed the market, it has also stressed this benchmark."
Bankers had expressed concern that rivals might be understating their true borrowing costs to avoid looking desperate for cash, distorting Libor. The BBA said that in future, "any discrepancies in the rates must be justified by individual contributing banks."
The BBA said it would increase checks on banks that contribute to the setting of that rate and also increase the number of banks that report borrowing rates for each of the currencies for which a Libor rate is calculated.
The BBA said the moves were designed to boost confidence in the measure as an accurate one of the rate at which banks borrow.
"These changes will further strengthen BBA Libor and the confidence of its many users," Knight said ahead of the conference, which is being attended by around 350 delegates.
The BBA has been calculating Libor rates since 1985, and says they are used to set rates for financial products worth around US$350 trillion.
Among the criticisms of Libor is the fact that the dollar Libor panel includes largely European banks, making a rate widely used in the U.S. susceptible to financial troubles in Europe.
The BBA said it would increase the number of contributors to some panels. It also said it would consult with banks on whether a second rate-fixing process for U.S. dollar Libor "might be set after the U.S. market opening."
Also due to speak at the one-day conference are Callum McCarthy, the chairman of the Financial Services Authority, who faced criticism after the collapse of Northern Rock, Bank of England Governor Mervyn King and Barclays chief executive John Varley.


Updated : 2021-03-05 05:26 GMT+08:00