By Maximilian Clarke

The British Bankers Association (BBA) penned a letter to Prime Minister David Cameron ahead of his meeting G20 leaders in Cannes, encouraging plans for growth whilst cautioning what they feel are more damaging proposals.

Specifically, the Association’s chairman, Marcus Agius, recommended the Basel committee on banking regulation be given more time to better complete their ‘important piece of work’. Further, the Association urged a speedy revision of the proposed ‘capital and liquidity regime’ that would better promote vital international trade.

Dated 2nd November, the letter in its entirety reads:

Dear Prime Minister

G20 Summit

I write to you ahead of the G20 Summit in Cannes on 3rd and 4th November 2011 to offer the perspective of the members of the British Bankers’ Association.

The UK banking industry continues to see the G20 as a vital forum through which to pursue the development of a coherent and strengthened international regime for the regulation of financial services. In the time since the G20 first set out its agenda, a number of vital gaps have emerged in the way in which that agenda is being pursued across jurisdictions. We urge the G20 leaders to reaffirm their commitment to the G20 process and to demonstrate this via renewed coordination of their actions and the removal of unilateral and protectionist measures.

The current economic and market uncertainty reinforces the importance of ensuring that the current roadmap for international reform is appropriate and that any further changes to the agenda are carefully considered and sequenced within that roadmap. This exercise should include a commitment to undertake a cumulative impact assessment of the regulatory measures underway, as well as any further measures proposed, and one which considers the interplay of regulation with macro-economic policy, fiscal policy and supervision.

The Financial Stability Board (FSB) has begun to make progress in the development of a framework to monitor the implementation of agreed reforms. We welcome the publication of the Coordination Framework for Implementation Monitoring and agree the approach and priority issues it identifies. However this exercise could be extended to include an explicit expectation that the FSB should identify examples of internationally -agreed rules being implemented in a manner which could have an extra-territorial or protectionist impact.

In terms of the technical issues for discussion in Cannes, we see the development of effective regimes for the resolution of failing institutions, including the proposals for so-called “bail-in”, as essential to the success of the wider regulatory reform agenda. It will be important for there to be consistency between the interaction of effective resolution regimes and the proposed regime for systemically important institutions to ensure that market discipline operates. We would see this as including recognition of the quality of an institution’s recovery and resolution plan in a supervisor’s approach to determining the size of a G-SIB (Global Systemically Important Bank) surcharge.

Whilst we welcome the changes proposed by the Basel Committee on Banking Supervision (BCBS) on trade finance we urge the G20 to do more to revise the capital and liquidity regime to ensure that trade is not penalised and can act as the engine of growth. However, we remain concerned that the Basel Risk Management and Modelling Group (RMMG) is still working towards a year-end deadline for its clearing rules. We consider that the G20 should give the Basel Committee and RMMG further time in order to be able to complete this important piece of work.

In conclusion, we welcome your Government’s continued commitment to the G20 and urge you to encourage your counterparts to engage in a constructive manner towards the delivery of a consistent, credible and economically tested regulatory regime.

Marcus Agius
Chairman, British Bankers’ Association[/i]

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