Hastily introduced banking industry regulation risks precipitating a second credit crunch and throwing the world's financial system back into crisis, HSBC chief executive Michael Geoghegan has warned.
New rules requiring banks to hold larger capital reserves, along with regulation forcing financial firms to split their businesses up could have disastrous consequences for the global economy said Mr Geoghegan in a speech yesterday.
Speaking to an audience in New York, Mr Geoghegan said their needed to be wider recognition that the global economy was "still strained".
"This isn't banks whingeing," said Mr Geoghegan.
"It's a real concern. What if we are right and it leads to further deleveraging? If it drives risk into unregulated parts of the system? And leads to regulatory arbitrage? These are all consequences banks and their regulators should want to avoid."
International rules on financial industry accounting will force banks to raise hundreds of billions of pounds of new money to meet new capital requirements, while pressure to force retail banks that operated large wholesale banking subsidiaries to spin off these businesses is growing.
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New York Times