US megafines threaten bank system, says UK

Tim Wallace
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Andrew Bailey wants more communication
Britain is standing up to the US on record breaking fines for banks, Bank of England regulator Andrew Bailey revealed yesterday.

Bailey has spent the years since the crash pushing banks to build up their capital buffers in a bid to make the system safer.

But now multi-billion dollar fines from the US risked taking those buffers away, undermining stability and growth, he said.

“I am trying to build capital in firms, and it is draining out down the other side,” he said at the British Bankers’ Association’s conference on financial crime and sanctions, warning that the fines are “denuding the capital base” of punished firms.

In future, Bailey wants US regulators to consult with the British authorities before levying big fines on UK banks.

Global regulators need to agree “what are the sensible penalties, what incentives do those penalties create, and do they clash with other public policy objectives, obviously of which the prudential objective is a very big one.”

The prudential regulation authority (PRA) chief also warned that the threat of enormous fines was pushing banks away from business in some poorer parts of the world.

“Clearly it can threaten economic growth and development in the world, in ways that can be highly disruptive to the broader growth of the world economy. That is a dilemma,” he said. “These are public policy objectives which are coming into conflict, and there is no good to be done by keeping them under the carpet.”

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