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Vickers warns UK bank leverage 'dangerously high'
The main mover behind Britain's post-crisis reform of banking regulation has warned leverage in the system is at dangerous levels and that capital buffers may not increase in time to deal with the next meltdown.
John Vickers, whose commission on banking devised the plan for big banks to ringfence retail banking operations, said he was puzzled the Bank of England had not imposed higher capital levels, the Financial Times reported. He said leverage, or capital to assets, was "dangerously high".
Vickers also took issue with BoE Governor Mark Carney's statements about the strength of capital requirements. Carney has said banks have to hold 10 times more capital since 2008 but Vickers said when measured against banks' assets there had been "nothing like this 10-times increase".
Vickers cast doubt on how effective a BoE's move to increase capital buffers to ward against future problems would be. "To get the thing up to substantially higher levels will take a couple of years and a crisis could come much sooner," he said at a conference organised by the FT and Fitch.
The BoE said in March it was considering strengthening banks' capital buffers to rein in loose mortgage lending. It also noted "elevated" consumer credit growth and stretched commercial real estate valuations.
Bonds issued by banks to absorb capital losses in a crisis may not be sufficient for banks to survive a crisis, Vickers added. "Bail-in-able debt is a substantial add-on but I don't think we can rely on it in a crisis and if we had another systemic crisis anything like the last one, goodness knows what would happen," he said.