Credit institutions and prudential supervision
Delivered in Plenary - 16th April 2013
There can be no doubt that, since the 2008 global credit crunch and the collapse of many banks internationally – which is still a problem, as evidenced by the most recent crisis in Cyprus and possibly now in Slovenia – all is not well with the capital adequacy of our banks, hence the need to tighten requirements under the Basel III agreements.
The Capital Requirements Directive (CRD IV) legislation before us today is controversial for several reasons as, for instance, it seeks to regulate pay, and in particular the bankers’ bonuses, which are, rightly or wrongly, blamed for encouraging over-leveraging and non-prudential banking as well as short-termism aimed at increasing immediate profit rather than long-term stability.
However, the CRD IV rightly aims to increase TO1 capital and liquidity levels, which is important, and eventually to introduce maximum leverage levels and also various buffers, as well as good governannce rules on bank management. The proposal allows the UK to go further in capital adequacy if it so chooses. Nevertheless, overall, because of the bonus issue which may well impact negatively on the City of London – which I am proud to represent – and the ignoring of several other Basel Committee requirements, I abstained, as did my delegation.