Bankers warn against ‘too tough’ rules

Stephen Green, chairman of HSBC said that a raft of increases in regulatory capital ratios could "easily withdraw credit from the economy and cause a new credit crunch".

He added: "The danger is going over the top with risk-averse measures, loading more costs on the system. We need to ensure that the reform of the financial system is one which enables the financial system to perform its role in generating growth, providing the right level of liquidity and capital."

Peter Sands, chief executive of Standard Chartered, also warned the Government that its plans for much greater regulation of banks would have a "real cost borne by the economy".

Green suggested that regulators should "adopt a counter-cyclical capital ratio policy for banks".

He said: "Nobody should think that too rapid an implementation of change can come without any cost to the European economy or indeed wider society. We need a phased approach to implementation, co-ordinated internationally, across the G20."

That would mean banks holding more capital during the good times as their loan exposure grows, and then, as the economy turns down, ratios are lessened in order to allow them to carry on lending to stimulate the economy.

Sands also said that the G20's bonus restrictions outlined in September were already distorting competition because they were being brought into place rapidly across Europe but delayed elsewhere in the world.

He added that Standard Chartered had already lost recruitment battles to Asian rivals because it was unable to pay a guaranteed bonus under Financial Services Authority rules.

Sands said regulators were "kidding themselves" if they believed higher capital and liquidity ratios could be absorbed by banks and their shareholders.