Over the weekend there have been reports that UK banks are finding it difficult to comply with the Basel II capital requirements and balance these with the pressure from the UK government and industry associations to hold lending to industry to pre-crisis levels.
On Saturday, the Daily Telegraph reported that the UK Treasury was considering recommending changes to the Basel II capital requirements following a request from the UK banks’. The banks point out that increased lending requires extra regulatory capital. Just before Christmas, Stephen Green, chairman of HSBC, on behalf of a group of major British banks, sent a letter to the Chancellor, Alistair Darling, saying that Basel II requirements were preventing their ability to lend in the current climate. The Treasury is reported as accepting that something needs to be done, even if only temporarily, and that it agrees that the current situation is pro-cyclical, i.e. intensifying the down-turn, but has said that any change would need international agreement.
See full Press Release.
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