Douglas Flint, chairman of HSBC, said that the new committee – chaired by Bank Governor Mervyn King – is likely to reduce capital in the financial system and, as a result, harm business lending. In an outspoken speech, Flint said the committee’s pending statutory powers “could easily materially impact access to credit and its pricing.”
The caution from Flint, one of the UK banking sector’s elder statesmen, will be seen as a shot across the bows of the Bank ahead of legislation designed to formalize the FPC’s creation as part of the Financial Services bill in next month’s Queen’s Speech.
His comments come three weeks after Peter Sands, chief executive of Standard Chartered, blasted the new financial oversight committee’s approach as “extremely interventionist and extraordinarily blinkered.” Sands said he was “dismayed” by the FPC’s call for extensive powers to control the UK’s financial system.
In the speech, given to the annual conference of the Association of Corporate Treasurers (ACT) in Liverpool, Flint noted that the FPC is beginning “to articulate how it wishes to exercise its statutory powers” including sectoral capital requirements – where banks would have to post more money against companies in specific risky sectors – and possibly a time varying liquidity tool.
“I see this as a significant new risk for you all to get to understand, as a change in sectoral capital risks could easily materially impact access to credit and its pricing,” he warned.
He added: “The landscape remains massively uncertain both as to when the period of reform will come to a close and what the landscape for the capitalization, shape and returns of the banking industry might be.”
He went on to say that this “touches on broader issues of global consistency and whether the regulatory agenda is favoring a transactional model over a relationship banking model.”
Flint has been one of the staunchest opponents of raising capital levels to unnecessarily high levels, but his comments about the FPC are thought to be the first time he has spoken publicly about the Bank committee.
At the end of the speech, he called on delegates to lobby the Government. The FPC, which has been meeting ahead of its powers hitting the statute book, was designed in response to the 2008 financial crisis, and intended to monitor the economy of the UK, looking at macro-economic and financial issues, The Telegraph reported.