G20 proposals 'let bankers off the hook'
Pressure groups complained today that banks were being "let off the hook" by the G20 after intense lobbying by the financial sector led to a delay to the introduction of rules requiring them to hold more capital.
After meeting in Toronto over the weekend the leaders of the G20 shelved a plan to implement new tough capital rules by the end of 2010 and gave governments leeway to introduce the measures at their own speed. One of the causes of the banking crisis was that banks did not hold enough surplus capital to be able to give savers their money back in severe economic downturns. Regulators around the world have now begun to demand that banks bolster their capital cushions – either by raising more money or cutting back on their riskiest activities.
Detail on exactly how much banks will be required to hold is promised for the next meeting in South Korea in the autumn.
Some campaigners were disappointed that the G20 had not taken a harder line, even though some banks had warned that if they are required to hold more capital they will not be able to lend as much to households and businesses.
Gavin Hayes, general secretary of left-of-centre pressure group Compass, said: "On a whole range of different measure the banks are being let off the hook, given we are in the worse financial crisis for more than 60 years. It's not just capital requirements but with bonuses too. It does seem to me that we are very much back to business as usual and unless we deal with the fundamental question of building capital ratios then the risk is another financial crisis years down the line."
Bankers, though, welcomed the delay. Stephen Green, chairman of HSBC, had written to David Cameron before the meeting, urging the prime minister to reach an international agreement on the new rules. Angela Knight, chief executive of the BBA, described the result as "a sensible compromise".
She said: "Banks' capital holdings have increased significantly in the UK since the credit crunch began, and the banks agree that the new proposals will increase stability further. The big question has been one of the time frame: the more capital the banks are holding, the greater the limit on what they can lend.
"The G20 statement clearly recognises, as we all do, that the new measures be phased in over a time frame which safeguards economic recovery and the ability of markets to provide funding to individuals and business customers."