Willy on banking

But at what cost, say critics? Requiring banks to hold more capital – even £17 to £20 for every £100 they lend, as Vickers proposes, instead of the old £4 – will only make the average cost of each parcel of lending more expensive, they say. The banks will pass that on to consumers and business so they will borrow even less – just when recovery needs them to borrow more.

OK, requiring more capital will not increase banking costs. With you so far.

The argument that the proposals would not have prevented the banking crisis is no less feeble. In a ringfenced world, because the riskier business would be much more obvious and less cross-subsidised by ordinary depositors and taxpayers, any non-ringfenced bank would have had to pay a great deal more for its huge cash deposits in the inter-bank markets and also hold much more capital to reassure depositors and shareholders.

And it will all be lovely because needing to hold more capital will make banking more expensive.

It\’s not all that much of a surprise that the Work Foundation went bust is it?

2 thoughts on “Willy on banking”

  1. I don’t know about whether the increased capital ratios will increase costs or not, but they will increase the cost of borrowing if are to believe supply and demand curves.

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