Bim Afolami, the City minister, was told on Monday that the Basel 3.1 regime risked inhibiting banks’ ability to lend to SMEs at a crucial time for the UK economy, Sky News understands.
By Mark Kleinman, City editor @MarkKleinmanSky
The Treasury has been warned that new rules being introduced by the Bank of England will inhibit challenger banks’ ability to lend into the real economy and fuel a rebound from recession.
Sky News understands that Bim Afolami, economic secretary to the Treasury, met a group of executives on Monday for talks about the regulatory obstacles standing in the way of growing their lending capacity at a crucial time for the UK economy.
Among those who attended the meeting were TS Anil, the Monzo chief executive; Andy Golding, CEO of OneSavings Bank; Daniel Frumkin, chief executive of Metro Bank; and Declan Hourican, TSB’s chief financial officer.
People briefed on the talks said that some of the executives in attendance warned that the Prudential Regulation Authority (PRA’s) proposals for implementing the Basel 3.1 banking framework could create significant barriers to growth.
Of particular concern is the PRA’s potential removal of the ‘SME support factor’, which allows banks to hold less capital against loans to SMEs, according to two sources.
Mr Afolami, himself a former City executive, replaced Andrew Griffith as City minister last autumn and is now playing a central role in the looming sale of a chunk of the government’s NatWest stake to retail investors.
One bank executive said he was “in listening mode” during Monday’s talks with bank executives.
The executive added that the adoption of Basel 3.1 would represent a key test of the PRA’s new secondary competitiveness objective.
Other companies represented at the meeting included Atom Bank, Arbuthnot Latham, Investec, Oaknorth and Paragon Bank.
A Treasury spokesperson said: “Basel 3.1 aims to strengthen the regulation, supervision and risk management of banks in response to the Global Financial Crisis.
“The Prudential Regulation Authority, which is overseeing the implementation of Basel in the UK, estimates proposals will increase capital requirements in the UK by 3.2%, compared to 16% in the US.”
