The most (popularly) insensitive quote of the year award goes to the FSA’s liquidity manager, David Morgan.
In a Friday speech on the FSA’s new liquidity rules for banks, which will see them buying more government bonds, he said:
Oct. 9 (Bloomberg) — British banks may pass on more than 2 billion pounds ($3.2 billion) in fees to customers to make up for the costs of implementing tougher liquidity rules, a U.K. regulatory official said.
Banks can charge retail and corporate customers higher rates and fees to maintain profit margins after implementing the rules, David Morgan, liquidity policy manager at the Financial Services Authority, said in London today. The cost to financial firms of using more expensive funding, such as government bonds, may reach 2.2 billion pounds a year under the proposals, according to FSA data.
“This is not a cost to your shareholders in the long term, this is a cost to your customers,” Morgan said in a speech. “You will pass these costs on to your customers.”
Thanks, FSA!
Putting the idea in even starker perspective on Monday — albeit with different numbers — were UBS banking analysts Alastair Ryan and John-Paul Crutchley.
They reckon the costs to bank customers of the new rules are equivalent to a 2p increase in the basic rate of UK tax:
The FSA’s policy statement on bank liquidity management, published last week, seeks to make UK banks less risky by having them buy £620 billion more in Gilts and similar instruments. A perhaps predictable reaction to the run on Northern Rock and, a year later, Lehman’s UK operations transferring substantially all their cash out of the country as the company collapsed, the rules will, on the FSA’s own estimates, impose costs of around £9 billion per annum on the UK consumer — equivalent to around a 2p increase in basic rate of income tax.
Related links:
More on bank bondage (and the end of QE) – FT Alphaville
FSA finalises liquidity bondage – FT Alphaville
Back to bondage – FT Alphaville