The approach of financial regulators to the banking system is increasingly incoherent. In the last year, regulators have made 14,200 new rules worldwide. At home, our government wants to ensure that failing banks are not a burden on the taxpayer, and a legal framework is being developed so that banks can fail safely. But, if this is achieved, we do not need the new onerous capital requirements that damage the economy. In tacit recognition of this, the FSA is relaxing the new capital requirements on loans under the Funding for Lending Scheme. The FSA is making the system look like the radio quiz game “Mornington Crescent”. Lower capital requirements in general would be welcome, but to start here is crazy. Taxpayers are explicitly on the hook if this scheme goes wrong and loans made under this scheme should not get special treatment.
Read the debate in City AM here.