FPC is set to hit lending, warns HSBC chairman

HSBC chairman Douglas Flint has joined the chorus of criticism against the Bank of England’s new financial policy committee (FPC) and warned it could reduce the pool of capital, increase lending costs and hit borrowing.

Flint used a major speech to warn of the “material impact” the committee could have on access to credit and its pricing. He also called on members of the Association of Corporate Treasurers (ACT) to step up lobbying of the government over the re-organisation of the financial system.

The FPC was created as part of George Osborne’s reform of City regulation, in which the Financial Services Authority will be scrapped. The FPC is “beginning to articulate” how it will exercise its legal powers over capital and liquidity, Flint said in Liverpool.

“I see this as a significant new risk for you all to get to understand as a change in sectoral capital requirements or commentary around emerging risks could easily materially impact access to credit and its pricing – think about the recent impact of the US authorities seeking information on US money market funds’ exposure to Eurozone borrowers.”

Flint’s comments came after Peter Sands, chief executive of Standard Chartered, damned the FPC as “extremely interventionist and extraordinarily blinkered”.

Last month the FPC said it had requested powers to adjust capital requirements through the economic cycle, charge banks for lending to sectors vulnerable to bubbles, and impose a maximum leverage ratio of total liabilities to capital.

Flint also warned of the impact on the competitiveness of corporates in Europe versus those in Asia and America, the cost of centrally cleared derivatives and on the creation of “potentially volatile” capital charges on over-the-counter derivatives under the proposed Basel III rules.

“[The] landscape remains massively uncertain both as to when the period of reform will come to a close and what the landscape for the capitalisation, shape and returns of the banking industry might be,” he said.