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NewsFebruary 3 2010

Standard Chartered chief warns UK regulator against “parochial” mindset

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Peter Sands, the chief executive of Standard Charted Bank, fears loss of international competitiveness to Asia if UK government over-regulates.

Mr Sands warned that over-regulation in the United Kingdom could lead to London losing out to other financial centres in the West and in Asia.

Writing exclusively for The Banker’s annual book, How to run a bank, Mr Sands said that, in the race to get “things agreed and done”, unintended consequences could undermine regulatory objectives.

Mr Sands added that if the UK implemented more onerous rules than others, as it appeared to be doing, there was no doubt that London would lose international competitiveness. “Better regulation is required, but we should not drive away one of the UK’s most successful sectors. The shift in global economic power to Asia should be an opportunity for London and the UK,” he said. “Yet London is likely to lose this historic opportunity if the UK government is too parochial and too backward looking in its mindset.”

In January, the Governor of The Bank of England, Mervyn King, called for far reaching reforms of the industry, including the limiting the risks taken by banks that hold retail deposits and ending the mentality of “too big to fail”.

According to Mr Sands, the greatest risk was that the “pendulum swung too far” and that the “understandable desire” to avoid another crisis resulted in regulatory overload, “hugely increasing the cost and cutting the supply of credit to the real economy”.

He says there is a danger that developed markets in general could lose international competitiveness to the emerging financial centres of Asia if governments in the West over-regulated. “To some extent this is inevitable, a natural consequence of the underlying dynamics in the world economy,” he said. “But regulatory arbitrage could accelerate this trend significantly.”

To read more go to http://online.thebanker.com/how-to-run-a-bank/

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