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BOE's Clark: tougher bank rules may be too hasty
LONDON May 24 (Reuters) - Global regulators may be toughening up rules to make banks safer too fast, which risks crimping the availability of credit to the economy, a senior UK regulatory official said on Thursday.
Discussion in the Bank of England's interim Financial Policy Committee (FPC) has been dominated by how to strike the right balance between encouraging banks to strengthen their financial position and avoiding undue constraint on credit availability, committee member Alastair Clark said in a speech.
"I think the committee accepts the need to explain more fully how it is seeking to strike the balance," Clark said.
"My own view is that, in our international regulatory initiatives, we may inadvertently have ended up front-loading the regulatory response more than was intended," Clark added.
It was a matter of degree rather than direction, he said.
World leaders have approved the Basel III accord to force banks to hold more core capital from January with full implementation by 2019.
Higher capital is seen as a core lesson from the financial crisis when governments had to shore up many lenders.
"Even though, for example, extended timetables were set for the implementation of Basel III, once the end point was announced market pressures have tended to foreshorten the effective period of adjustment," Clark said.
Britain's biggest banks already have core capital buffers equivalent to 10 percent or more of their risk weighted assets, well above the 7 percent Basel minimum.
The banks have also had to build up liquidity buffers well ahead of the Basel timetable and separately on Thursday, a BoE executive director Andrew Bailey, hinted that pressure on lenders to beef up buffers could be eased to avoid adverse effects on the economy.
Banks say they cannot hold very high buffers and keep lending to the businesses and consumers.
The FPC is one of a new breed of watchdog which looks at macroprudential risks like asset bubbles that could destabilise the wider financial system.
Clark sought to downplay what the committee can achieve, saying it is not and never was intended to be the "all singing, all dancing, one-stop-shop for delivering financial stability".
Such watchdogs were conceived by policymakers to cool markets but FPC members are faced with an economy that needs stimulating and the tools it has are largely untested.
"So how to choose which instruments to use? Well, I think we have to recognise that these choices are now, and are likely to remain for some time, partly matters of experiment," Clark said.
Britain is approving a law that will put the FPC on a permanent footing from next year, also giving it powers to direct supervisors to take specific actions.
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