The Bank of England (BoE) has unveiled its plans to continue with its ring-fencing rules that separate financial firms’ retail banking from investment banking.
BoE financial policy committee member and ex-Barclays chief Martin Taylor said in a speech that it was vital for regulators to hold firm on regulation instead of easing off on rules dismissing threats from banks like HSBC and Standard Chartered that they move their domicile from the UK.
Taylor said: "Speaking as a former banker, I don’t believe regulation alone is likely to prompt bank re-domiciling – apart from anything else, the rules are not that easy to escape.
"The increasingly shrill emergence of voices calling for a regulatory softening is both structurally wrong and conjuncturally wrong."
However, the BoE’s Prudential Regulation Authority (PRA) has made a number of amendments to its original proposals but it has refused to acknowledge that responses to its initial proposals had necessitated major changes.
According to the regulator, the changes will help to avoid a repeat of the bank failures seen during the 2007-09 financial crisis, during which Britain rescued Royal Bank of Scotland and Lloyds Banking Group at a combined cost of £66bn to taxpayers.
The regulator will take up a further consultation with banks on capital and liquidity requirements for the ring-fenced entities during 2015 and will publish final rules in 2016, giving firms sufficient time to implement the changes ahead of the deadline slated on 1 January 2019.
Taylor added: "It remains the ungrateful job of the supervisors to save the banks from themselves."