Bankers have had to learn a new humility since the financial crisis and its many related scandals.
They (not to mention their investors) have had to pay for it too through higher capital requirements, higher personal accountability for managers – no more floating off into the sunset if your bank crashes – and caps on bonuses.
Yet there has also been an unmistakable air of turning the page this year, as lenders return to profit and, whisper it, finally put the financial crisis behind them.
Now the Bank of England has endorsed that feeling. At a speech yesterday at the Westminster Business Forum, the Bank’s executive director for prudential policy, Vicky Saporta, hailed something like the end of a decade-long effort to kick the regulatory system into shape.
The end of Basel III is “a major milestone for regulators globally”, she said. “The wave of regulatory reform following the global financial crisis is now over. You should not expect a lot of further reform to bank regulation, particularly regulations regarding banks’ capital and liquidity.”
Few believe that the job is quite done. Some economists are convinced that banks can and should have higher capital requirements. Meanwhile, ask any senior banker to name one regulation they would dispense with and they will reel off a list. But it is striking how most crave stability above all else.
Events a decade ago have taught that complacency would be foolish, but it is clear that perpetual revolution in the regulation that underpins banking is not desirable. An acknowledgement that banks should now be able to bed down and start focusing on their businesses is welcome.
Meanwhile, the regulatory focus will now shift to “unintended consequences and new risks”, Saporta added. Regulation can now start looking forwards rather than backwards, and it is positive that top Bank officials have the self-awareness to acknowledge that they and the systems they put in place are not infallible. Few desire a bonfire of the regulations, but an openness to tweaks to the system is sensible.
British lenders will have enough on their plates even without regulatory change. Brexit may well lead to big adjustments, while the technological change currently upending business models worldwide presents an existential challenge. If a new era on the regulatory front allows banks to turn their gazes on the future then it would constitute a grand achievement indeed.