Tighter financial regulation around the world is constraining bank lending to businesses, according to research published today by Allen & Overy LLP, which polled its regulatory and finance lawyers.
The Basel Committee on Banking Supervision’s incoming rules and U.K. recommendations from the Independent Commission on Banking may “have much wider economic impacts” than the changes intend, including stifling credit, A&O said.
“Four years down the line following the crisis we are seeing huge amounts of regulation, thousands of pages, impacting banks,” Etay Katz, a regulatory partner at the London-based law firm, said in an interview today with Mark Barton on Bloomberg Television. “Despite international efforts to harmonize regulation, we see a lot of turf wars, incohesion, duplication, and more than anything uncertainty.”
The law firm asked its employees whether new regulations were having a positive, neutral or negative impact on the availability of credit across 11 separate areas of finance, including corporate lending, bonds and trade finance, in 13 countries.
The so-called Basel III rules would more than triple the core capital that banks must hold as a buffer against insolvency, while the U.K. recommendations suggest placing firebreaks around British banks’ retail operations.
Allen & Overy is the third-largest member by income of the U.K.’s so-called magic circle firms and has about 2,700 lawyers in more than 40 offices around the world.