Poorly thought-out regulations are damaging Britain’s banks and hurting developing countries by cutting off access to finance, the head of the British Bankers’ Association’s (BBA) warned last night.
The sector has been flooded with new regulation since the crisis, and is at last standing up to challenge it, with BBA chief Anthony Browne highlighting the unforeseen consequences of many of the changes.
The anti-money laundering rules are a particular focus for the BBA.
“The demands placed on banks to know their customer’s customer, even in countries where such records are not routinely kept, means that banks have little choice but to terminate relationships or risk eye-watering, balance sheet altering fines,” said Browne in a speech at the Mansion House.
“Western banks have cut at least 1,000 relationships with correspondent banks in emerging markets.”
Cutting those ties stops migrants in rich countries sending money to families overseas, stops firms from getting trade finance, and slows economic growth in those developing countries, he added.
“The consequences can be devastating,” Browne said in his speech.
But the Treasury stuck to its position on the rules. “The government is committed to ensuring Britain’s financial system is a hostile environment for illicit finance, which is why we have comprehensive anti-money laundering and counter terrorist financing regimes in place,” said a spokesperson.
“We work closely with all concerned to ensure the anti-money laundering rules remain effective and proportionate and that the industry implements them appropriately.”
The BBA also attacked Labour’s plans which threaten to break up banks that become too big.
“We should be encouraging banks to take on new customers not demanding that they dream up new ways of losing them,” Browne said.
“It doesn’t take a genius to see where that could lead – worse customer service, and a focus on the customers who can pay the most.”
But Labour maintained it is the best route to real competition.
“There needs to be more competition in banking so that both individuals and businesses get a better deal,” said a spokesman for the party.
“Labour will work with the Competition and Markets Authority to make the banking market more competitive and create at least two new challenger banks.”
THE BANKS’ PROBLEMS
■ Anti-money laundering rules are forcing UK and EU banks out of developing countries.
■They have to know the people their customers are dealing with – which is often impossible in countries without formal, modern financial record keeping.
■ Liquidity rules were stopping banks investing in long term projects such as power plants, the BBA said.
■ The rules are meant to make sure banks can access funds quickly, instead of being tied up for a long time.
■ The banks object to Labour plans to introduce more competition – they want new banks, but Labour is threatening to break up the existing large ones.