LONDON (Reuters) – The Bank of England risks leaving banks “uninvestible” due to how it applies capital requirements and introduces ad hoc changes like banning dividends, NatWest Chair Howard Davies said at an event on Tuesday.
The BoE was holding a conference on how it could apply its new objective of facilitating the post-Brexit global competitiveness of the financial sector.
Davies, who is due to stand down next year, singled out how the British central bank stopped banks paying dividends during COVID-19 as an example of rulemaking where competitiveness should have been considered, given banks were well capitalised.
“The dividend ban was, I believe, a damaging intervention, and suggested a lack of confidence in the regulator’s own regime, and damaged the image of European banks in the eyes of investors with a significant impact on competitiveness,” Davies told the conference.
The BoE’s banking supervision arm, the Prudential Regulation Authority, has become a “gone concern, rather than a going concern regulator”, too focused on capital holdings, Davies said.
PRA plans for implementing the remaining Basel global capital rules could leave UK lenders at a competitive disadvantage to EU rivals, he added.
Regulators don’t give the impression they are much interested in profitability and viable business models, he said.
“We can’t assume that the major institutions on which the system is built can sustain ever increasing capital requirements and more and more costly consumer focused interventions,” Davies said.
(Reporting by Huw Jones; Editing by Sharon Singleton)
