Knight urges caution over bank reforms

FORCING large banks to shrink would damage the UK economy, the chief executive of the British Bankers&rsquo; Association (BBA) Angela Knight warned yesterday.<br /><br />Speaking to City A.M. ahead of today&rsquo;s annual BBA international banking conference, Knight said the BBA would not support any move to scale down large banks and urged governments not to rush through changes to capital requirements.<br /><br />&ldquo;It may be a good headline to say banks should be smaller but many of the biggest banks headquartered in the UK have managed well,&rdquo; she said.<br /><br />&ldquo;You have to think of what the consequences would be if banking operations are constrained &ndash; that doesn&rsquo;t mean that we are against change.&rdquo;<br /><br />Her comments contrast sharply with governor of the Bank of England Mervyn King&rsquo;s suggestion earlier this month that any bank considered too big to fail, was simply too big.<br /><br />Knight also warned that moves to impose new counter-cyclical capital requirements, while desirable, needed to be carefully timetabled to avoid constraining banks&rsquo; ability to lend.<br /><br />She said such requirements should be delayed until the global economy is recovering, to ensure that banks can conserve capital and lend at the same time, adding that efforts should be internationally co-ordinated.<br /><br />She also called on the UK government, regulators and financial industry to &ldquo;get more closely involved&rdquo; with the EU drive towards regulatory reform, to ensure that the UK is not left out of the debate.<br /><br />Knight will outline her concerns in a speech at today&rsquo;s BBA conference, where speakers will include Financial Services Authority chairman Lord Adair Turner, HSBC chairman Stephen Green and Liberal Democrat Treasury spokesman Vince Cable.