Bank stock volatility this year shows that the Bank of England should “think again” about its capital buffer requirements for U.K. lenders, according to John Vickers, who led the Independent Commission on Banking.
The BOE’s 11 percent goal for the “appropriate” level of Tier 1 equity, a regulatory measure of financial strength for the banking system, is “questionable,” Vickers wrote inthe Financial Times.
“So the BOE is proposing substantially milder equity requirements for British banks than did the ICB,” Vickers wrote in an op-ed for the Financial Times on Sunday. “The wisdom of this policy is questionable.”
Vickers, whose ICB report in 2011 recommended firebreaks should be built to separate consumer banks from riskier securities units, said more effective resolution arrangements aren’t a substitute for adequate loss-absorbing capacity. Supervision has improved but remains imperfect, and ringfencing deposit-taking banks is no reason to go easy on capital requirements, he wrote in the article.