Heavy price of light-touch regulation...

MOST people are aware of how strong the banking and financial sector is for the UK economy.

What worries me as a corporate finance lawyer is a proposal in the US to move away from international banking regulations and treaties which could have ripples abroad.

One thing we learnt since the financial crisis caused by Lehman Brothers is that there is a risk of financial contagion when large financial institutions get into trouble. Currently, there are issues with Italian banks which has resulted in Germany continuing to throw money at a legacy problem still not fixed.

The requirement for banks to have stronger balance sheets is something everybody is now familiar with. Banks have also started ring-fencing riskier aspects of their business such as investment banking so consumers are better protected in theory.

People say all this regulation has made it harder for consumers and businesses to borrow, but surely implementing stronger procedures can help avoid bad debts and reckless borrowing.

So many business clients I deal with borrow when they need to, but even then they like to ensure they have a comfort blanket of sufficient cash reserves to avoid the unforeseen.

It is important to recognise these banking regulations have helped create a level playing field when it comes to international banking – something we should not move away from lightly.

I hope the UK does not go down the route of the light-touch approach to encourage banks to stay in the UK. There is talk of making the UK, Europe’s new tax haven post-Brexit. Looking back in history one can see how in the 1980s Japanese banks did not carry sufficient capital to protect against their riskier investments which caused a crisis at that time and this is history we do not want repeated in UK banks.

On most things I am a firm believer that less is more when it comes to regulation but what the last few years have taught me since the financial crisis is that when it comes to capital for any business owner the opposite is true therefore this principle should extend to our banking system. Colin Rodrigues is head of the corporate team at Hawkins

Hatton