Leading bankers hit out at proposed tough banking regulations

According to the world's leading bankers, banking regulations that are too tough would put a drag on economic recovery and cost more than 10 million jobs globally.

The Institute of International Finance (IIF) yesterday lashed out against national governments seeking to 'gold-plate' the new Basel III regulations with 'arbitrary constraints'. The Washington-based body warned against unilateral actions for saddling banks with fresh levies or even tougher capital requirements, or to advance the implementation of Basel III which does not become fully operational until 2019.
 
The institute said such moves would add to the cost of raising capital in the financial system, which would in turn lead to higher costs for households and businesses. It would also result in less corporate lending, as also less credit for international trade.

The body represents 420 of the largest global financial institutions.

According to Deutsche Bank chief executive and IIF chairman Josef Ackermann an "overreaction" by national regulators would jeopardise lending to the real economy. He added there could be no doubt that reforms would produce a drag on economic recovery, which meant that jobs that should be created and needed to be created may not be created.

According to Peter Sands, chief executive of Standard Chartered, the impact on the real economy could conceivably be as large or greater than our original assessment of a loss of about 10 million jobs. The stakes were too high to be exaggerated he added.

The IIF's move comes at a time when concern about a "jobless recovery" is rising with some 30 million jobs destroyed globally in the recession. The bankers are in the process of warding off moves to break up the biggest banks.