Don't trust bankers

7 October 2009 By Edward Hadas Follow @edwardhadas

Bankers are moaning that harsh regulators will force cutbacks in lending just what the world doesn t need. It s hardly likely. Markets are helping banks build up capital look at Lloyds, BNP and SocGen. If more is needed, shareholders and employees can take more pain.

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Stuart Gulliver, head of HSBC's investment banking division, expressed concern about the impact of tougher new capital rules on October 7. He warned that they could affect the dividend plans of many banks, including HSBC.

I am very concerned about the cumulative impact of the capital rules, said Gulliver. Clearly, the industry has to move to a different capital basis. The issue is the speed at which we move.

Mario Draghi, the head of the Financial Stability Board, said in an interview with Frankfurter Allgemeine Zeitung on October 6 that putting new Basel II capital regulations into practice too quickly could exaggerate economic booms and busts.

"We have to take into account that too fast an activation could have procyclical consequences. That means that tougher rules on capital can only be done gradually," said Draghi.

Josef Ackermann, chief executive of Deutsche Bank, said that bank regulators should be cautious about raising minimum bank capital requirements on October 3.

The capital issue is important, but it's not as important as liquidity and profit, said Ackermann in response to G20 proposals to reform the financial system.

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