LONDON (AFP) – Bank of England governor Mervyn King, who steps down this week, on Tuesday attacked commercial banks for their intense political lobbying against new rules on capital reserves.
King, who will be replaced by former Canadian central bank chief Mark Carney on July 1, told lawmakers that lenders have sought to place "tremendous pressure" on politicians to lean on regulators in a bid to water down demands to strengthen capital levels.
The BoE boss made the comment in his final appearance before parliament's Treasury Select Committee, which is a group of cross-party lawmakers.
King added that there were "certainly calls made to Number 11 (Downing Street) and even in some cases Number 10" to put pressure on the Prudential Regulation Authority (PRA), which is the BoE's banking supervision arm.
10 Downing Street is the official residence of British Prime Minister David Cameron, while finance minister George Osborne lives next door.
"Very often it was the first response" for banks to contact politicians after they have been in touch with regulators, King said.
Turning to the outlook, he also warned troubles in the wider global economy remained a risk to Britain, with the unfolding credit crunch in China "really quite significant" and the eurozone still battling debt woes.
Last week, the Bank of England's PRA division said that five British banks must together find an extra ??13.4 billion (15.7 billion euros, $20.7 billion) to meet international rules on amassing sufficient capital cushions against the threat of future financial crises.
The five lenders included Barclays and bailed-out pair RBS and Lloyds, as well as The Co-operative Bank and Nationwide Building Society.
The PRA had said that the five banks faced a total shortfall of ??27.1 billion as of the end of 2012.
The lenders already had plans in place to raise ??13.7 billion of capital -- but needed to find another ??13.4 billion via asset disposals and internal restructuring, according to the PRA.
This would allow the lenders to have a capital cushion equivalent to at least 7.0 percent of the risks being carried by a bank, as required by so-called Basel Three international rules created in response to the 2008 financial crisis.