Monday, June 20, 2016


Costs of Regulation and Solvency of Banks (Prudential Regulation)

I have been told that the Leave estimates of the "cost" to the UK of Brussels regulation include a figure put in for the extra capital requirements imposed on the banks post-crash. This will be an extremely large sum but, as with so much of the debate, all is not quite what it seems.

First the requirement stems not from the EU but is a requirement of  the Basel Committee on Banking Supervision, which aims to strengthen the regulation, supervision and risk management of the banking sector. Basel 3 proposals were formulated by a group of central bankers from ten countries including the UK, but not the EU as such, and endorsed by the G20 in 2010.  It has been implemented in Europe through adoption into the EU legal machinery but in all essential features is a global agreement between developed countries.

Second the inference of claiming this as a cost must be that Leave are saying that this capital requirement could be scrapped if the UK were to leave the EU. That seems unlikely. It would, one might assume, be the end of London as a financial centre and probably consign the UK to banana republic status.

But I would be grateful if anyone has any information that contradicts any aspect of the above.

Addendum. A commenter has advised that exactly this point has been covered by Jonathan Portes in an overall review of the supposed costs of EU regulation. Portes says this is the second highest item in the list.

1 comment:

Anonymous said...

According to Jonathan Portes this is the second highest item in the Leave list. He confirms your analysis on this point and also deals with a number of these claims in general.This can be found at