LONDON Feb 13 Britain wants to give its risk
watchdog powers to impose tougher limits on how much banks can
extend their debt, a step which could put it at odds with
globally agreed rules.
The country has been taking a hard line approach after
having to bail out many of its banks, and wants to tighten
controls over a financial sector that is many times the size of
While Britain broadly backs so-called Basel III global rules
aimed at preventing a repeat of the 2007-09 financial crisis, it
wants room for manoeuvre to impose tougher measures when it
The Bank of England's Financial Policy Committee (FPC), set
up to plug supervisory gaps highlighted by the crisis, can force
banks to increase their capital buffers.
Britain's financial services minister Greg Clark told a
panel of lawmakers on Wednesday he also wanted the committee to
be able to temporarily impose stricter leverage curbs on banks
than the limit laid down by Basel III, when financial stability
The leverage ratio measures a bank's total assets against
its equity, and under the Basel III accord, it has been set at a
3 percent, meaning leverage should be no more than 33 times
"The government's view is we want to give the FPC
time-varying leverage powers and that is our intention," Clark
told the Treasury Select Committee.
The lawmakers on the Treasury committee want to go further
than the government and impose a permanent tougher limit, at
least 4 percent, or leverage of no more than 25 times assets,
but the government has rejected this call.
Clark said the European Union was finalising a law to put
Basel III into effect and that Britain hoped it would include
wriggle room for all member states to vary bank leverage from
the global norm when needed.
"We are arguing for it very strongly in Europe," Clark said.
A senior EU lawmaker said this week a deal on the law may be
possible on Tuesday and Clark was unable to say what would
happen if Britain's request was rejected.
The FPC's core role is to stop asset bubbles, often
described as taking away the punch bowl.
Clark signalled the government would generally back such
tough decisions when warranted and not try to undermine the
committee with a running commentary on its actions.
Nevertheless, the committee "should not be entirely
closeted" and its members should be open to hearing directly
from banks and other parts of the industry, he added.
After having to shore up several lenders, including Royal
Bank of Scotland and Lloyds, Britain has
ditched its "light touch" pre-crisis approach to regulation and
become one of the world's leading hawks.