Well, it was obvious that this bullet point from the Merlin agreement:
implementing and applying European and international rules to create a level playing field in both policy and practice whilst protecting and maintaining the particular strength of UK financial services, and without pre-judging the outcome of the Independent Commission on Banking (IBC).
was a strong signal that the UK’s Treasury wasn’t going to back our bank regulators’ tough line. Some confirming evidence comes today as the Chancellor sounds the retreat on the UK’s untypically stiff liquidity regime:
George Osborne is looking at ways in which Britain’s tough bank liquidity rules might be eased, potentially saving banks hundreds of millions of pounds and releasing funds for lending to businesses and homeowners.
The chancellor is said to be looking sympathetically at claims by the banks that Britain’s regulators have gone too far in their efforts to avoid another Lehman Brothers-style crisis and have put the City at an international disadvantage.
That sounds like a done deal, from the Chancellor’s side. From the banks’ point of view the hoped for quid-pro-quo (more SME and homeowner lending) is completely optional. They have already made a very undemanding, or completely empty commitment to lending to SMEs, in the Merlin agreement, so I don’t see why they should now feel particularly compelled to offer more.
This ‘negotiation’ between banks and government is pure black comedy; or just kabuki, if you can stand the confusion of genres.
UPDATE: Oh dear, Barclays don’t seem to think the bonus-capping part of the agreement is worth complying with either.