By JEREMY WARNER [Daily Telegraph] – After the calamity of the past three years, it seems clear enough that something had to be done. It is also the case that bankers perhaps don’t deserve a hearing given the disastrous costs their recklessness has imposed on society. Yet I fear that in what is admittedly a perfectly understandable attempt to bulletproof the banking system against future crises, we are rushing headlong into an extreme regulatory over-reaction that will have some very negative long-term consequences for the UK economy.
If this were just another Dangerous Dogs Act, it wouldn’t much matter. Over-reacting to a crisis is part of the stuff in trade of modern politics. But banking is a lifeblood industry for the UK, and to adopt policies that will make the sector smaller and less profitable at a time when there is no high growth alternative self-evidently coming up in the wings to save the British economy seems almost wilfully self-destructive.
There are much bigger issues to address in banking right now than reform, not least how to deal with an ongoing solvency crisis which shows every sign not of getting better but of becoming worse still. It looks almost perverse to be worrying about how to prevent future credit bubbles at a time when actually, a little bit of credit expansion is just what we need. Risk aversion is at its highest level in a generation or more, with banks already de-leveraging as fast as they possibly can. They scarcely need pushing.
Continued in The Telegraph | More Chronicle & Notices.
