Top bankers warn on the cost of new FSA powers

Two top London bankers yesterday stepped up warnings that tightening regulatory rules on capital and bonuses too soon could stall economic recovery.<br /><br />HSBC chairman Stephen Green said that planned increases in capital ratios could &ldquo;easily withdraw credit from the economy and cause a new credit crunch&rdquo;.<br /><br />He added that &ldquo;going over the top with risk-averse measures&rdquo; could &ldquo;interrupt and delay a fragile economic recovery&rdquo;.<br /><br />Peter Sands, the chief executive of Asia-focused bank Standard Chartered, also hit back at the banking regulation clampdown, saying the costs will be borne by customers. <br /><br />Sands said that policymakers were &ldquo;kidding themselves&rdquo; if they thought higher capital and liquidity requirements would be absorbed by banks and shareholders.<br /><br />&ldquo;The reality is that a lot of that incremental cost will just get passed on to their customers in terms of increased pricing,&rdquo; he said in an interview. &ldquo;This is not a risk-free, cost-free game here.&rdquo;<br /><br />And speaking ahead of the Queen&rsquo;s speech later today &ndash; which will confirm government plans to give the Financial Services Authority the power to rip up bankers&rsquo; contracts if they are seen to reward excessive risk taking &ndash;&nbsp; Sands hit out at the plans.<br /><br />He said that &ldquo;it seems to be impractical and contrary to the government&rsquo;s intention of trying to move forward in a globally co-ordinated fashion&rdquo; and could &ldquo;undoubtedly harm London as a global financial centre&rdquo;.<br /><br />Sands is an influential voice on the subject, having advised the government on its first bailout of the banking system while leading Standard Chartered through the credit crisis largely unscathed.<br /><br />Sands said he thinks the economic crisis is far from over and that the blame for it should not lie just on banks, but on macroeconomic problems as well.<br /><br />&ldquo;If we don&rsquo;t do something about these economic problems, we run the risk of further problems in the future,&rdquo; he said, noting potential risks associated with large amounts of borrowing.<br /><br />&ldquo;I don't think there is enough prioritisation in the regulatory debate right now,&rdquo; he said, adding he would focus on both capital and liquidity.