John Longworth, the new director general of the British Chambers of Commerce (BCC) said he accepted the “need to ensure our banking system is robust” but said any reforms must be considered “in the wider context of economic growth”.
“We must ensure that new regulations, however desirable in principle, do not inadvertently derail the fragile recovery,” said Longworth.
“While we support the broad aims of ring-fencing, the implementation can only be considered over the longer-term, to avoid any unintended damage to the economy. The costs and effort involved in banks separating retail and investment banking operations could be enormous.”
Meanwhile, Giles Williams, head of KPMG’s Regulatory Centre of Excellence in Europe warned that implementing the ICB’s proposals will “come at a cost” and said government “must strike the right balance between financial stability and economic growth.”
“If financial stability means a reduced risk profile for banks, it is clear that customer borrowing costs will go up and the flow of credit to the economy will be reduced,” he said.
The Federation of Small Businesses echoed these concerns and said banks must not use the reform of the banking sector as an excuse to increase the cost of borrowing for cash-strapped small firms.