BANKS will spend the coming years pushing regulators to scrap incoming rules which will force them to match long term lending with long term funding, emboldened by their success in getting liquidity rules weakened, City A.M. has learned.
The British Bankers’ Association spent several years arguing the Liquidity Coverage Ratio would force banks to reduce lending and so harm the economy, resulting in regulators giving banks a longer timetable to comply, as well as a wider range of instruments to use in building their liquidity buffers.
So the BBA has now set its sights on the net stable funding ratio (NSFR) rules, coming in in 2018.
They will force lenders to back loans with long-term funding, which banks say effectively ends the maturity transformation model on which they rely, pushing up costs for customers and hitting lending.
On top of that insurers are facing new rules which make it more expensive for them to lend funds for a long time, making it harder for banks to get such funding.
“We want regulators to lower the proportion of one year plus funding required to recognise such longer term funding will be expensive for banks, if it is available at all,” said the BBA’s Simon Hills.
“That extra cost can only be passed on to customers. It might not have a huge impact on residential mortgages, but for infrastructure finance the costs will rise which will affect things like the price of renewable energy.”