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Sancho Panza

Banks Should Raise Capital Levels To Double The Current Norm, Sir John Vickers

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Telegraph 9/9/13

' Sir John told the Financial Times that in a "blue-skies" world, banks’ core tier one capital ratios would now be 20pc, rather than the 10pc he recommended as chair of the Independent Commission on Banking.

He also said a 3pc leverage ratio, which forms part of the Basel III voluntary rulebook on bank capital adequacy, was "not very sensible".

Such a ratio means that for every £33.33 lent, banks must hold £1 in reserve in case the borrower defaults on the loan. However, Sir John said he believed the right leverage ratio was closer to 10pc.

“It is not very sensible to run a market economy on the basis of a banking system that is 33 times leveraged, let alone 40 or 50 times leveraged," said Sir John. '

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