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UK govt urged to set up new body to help investment banking thrive

Expectations for the first hike in interest rates from the Bank of England have receded to the fourth quarter, the second time in three weeks that analysts have pushed back their forecasts, a Reuters poll found on Tuesday.

[LONDON] Britain's government should set up a new body chaired by the finance minister to ensure banking regulation is not excessive and help coordinate policy so international banks can thrive in London, the country's banking lobby group said.

The British Bankers' Association (BBA) said on Friday the new agency should have responsibility for ensuring delivery of policy for international banking and the regulatory approach across government departments and regulators.

It should be chaired by Finance Minister George Osborne and include the governor of the Bank of England, the BBA said.

The proposal was one of 23 recommendations set out by Britain's former top financial regulator Hector Sants, now vice-chair at consultancy Oliver Wyman, in a report for the BBA on the industry's competitiveness.

It said Britain should also consider bringing changes to its bank tax into force earlier and setting up a new independent agency to determine penalties imposed on banks and how they should pay compensation to customers.

The report said changes are needed because London's attractiveness as a destination for international investment banks was being eroded by factors including unilateral regulation, tax uncertainty and weakening profitability across the industry. "Wholesale banking is an internationally mobile industry and there is a real risk this decline could accelerate," said Anthony Browne, BBA Chief Executive.

He said many banks had been moving jobs away from London and Britain's market share of activities linked to capital formation, such as cross-border lending and initial public offerings, was static or falling.

The BBA said the government had adopted a more positive stance towards banks since an election in May and it should now set out its plans for "stable policy and regulation" of international banks, which account for more than 30 per cent of the 405,000 people working in banking in Britain.

The BBA and Oliver Wyman report, titled "Winning the Global Race'", also said supervision of investment banking conduct should be beefed up by introducing more specialisation at the Financial Conduct Authority.