This confirms what your humble blogger has been saying. It was fully predictable, and I did, that the real economy would suffer as a result of the financial regulators pursuing a meaningless 9% or higher Tier 1 capital ratio.
The pursuit of higher bank capital ratios is a classic example of the damaging policies that the financial, academic and regulatory complex (FARC) supports.
It is time for a change of course.
Britain is contracting as fast or even faster that those eurozone states – Spain, Italy – imposing far tougher fiscal austerity. This has caused some consternation....
Regulators have choked the British banking system even more violently than European regulators have choked the eurozone banking system....
Professor Tim Congdon has been arguing all along that the regulatory assault on banks across the world over the last four years is the biggest single reason why the global economy has failed to recover. I think he is probably right.
The policy is pro-cyclical folly and is asphyxiating the M3/M4 money supply almost everywhere.
Forcing banks to raise more capital is for booms not busts, ideally according to some sort of sliding scale or lean-against-the wind principle.
The Europeans forced banks to raise core Tier 1 capital ratios to 9pc by a deadline last month – ie, find a friendly Gulf sheikh (fewer of them around than you might think) or shrink lending.
No wonder eurozone banks have slashed their balance sheets by €4 trillion since the Great Recession – crippling Club Med in the process. But the British have gone even further, and to make matters worse we have a higher sensititivity to credit than Germany or France....
British banks have deleveraged drastically. ... It is why there is a perpetual lending crunch.
Regulatory overkill is the biggest single reason why Britain is in a deep double-dip recession.