Coalition Government business secretary Vince Cable dismissed UK bank claims that the new Basel III regulations will lead to an end of the era of “cheap money,” instead insisting that if banks continue to be stingy in relating to granting business loans it could choke Britain’s economic recovery efforts.
Secretary Cable issued a warning that the coalition government would have a zero tolerance policy in regards to business bank accounts using the new regulations to reduce their lending to small and medium sized businesses, as those firms are already complaining bitterly of a lack of credit for working capital.
Industry experts responded positively that the new Basel III regulations will not go into effect until 2019, and also that the requirements will not be as stringent as some had feared. The new rules dictate that banks must hold a minimum of 7 per cent of their capital in a cushion in the event of a bank failure, which is up from 2 per cent, yet it is of note that all British banks currently meet or exceed this new minimum.
Banks have voiced their distaste for the new regulations, stating that in order to hold an increased amount of capital, they will have less available funds for business loans, and the fees associated with those loans will rise as a result. British Bankers’ Association chief executive Angela Knight stated that while the aims of Basel III are to stabilise the economic landscape, it will merely add to the operating costs of banks by billions.
The business secretary has issued warning to British banks that they cannot use Basel III as an excuse, however, stating that the biggest banks in the UK are capitalised very well, in fact exceeding the new recommendations by the new regulations, which means there is no possible way that banks can rationalise restricting credit.