LONDON (Reuters) - Rules to make banks safer after the financial crisis need to be simplified quickly to stop large banking groups using them to their advantage, a senior Bank of England official said on Wednesday.
The remarks by Andrew Haldane, the bank’s executive director for financial stability, echo comments he made in Washington on Tuesday, when he said simpler rules were needed to make it harder for big banks to game the supervisory system.
Haldane, in a speech at an International Law Review dinner, called for quick action to simplify the regulations. He pointed to concerns that the rules allow big banks to make use of in-house risk models to hold far less capital than small banks.
The global Basel Committee on Banking Supervision, which has written most of the banking rules, is starting to consider some simplification.
But Haldane said there was a risk this would be tackled in piecemeal fashion and faster action was needed. “Peeling the onion one layer at a time tends to end in tears.”
Haldane and U.S. regulator Thomas Hoenig were the first senior policymakers to challenge Basel’s new bank capital rules now being phased in as a response to the financial crisis.
The global roll-out of the Basel regime began in January and will take six years but the European Union and United States have yet to formally implement it.
Last week, the Bank told British banks to tighten up the way they quantify risk to reassure investors and regulators.
From this month, a new unit at the Bank, the Prudential Regulatory Authority, became Britain’s new banking supervisor.
Reporting by Huw Jones. Editing by Jane Merriman