Peter Sands, who played a behind-the-scenes role in drawing up the framework for bailing out Britain's banking industry, said shareholders were encouraging banks to hoard capital at the same time regulators and politicians were trying to restore the flow of credit to the economy.
“The policymakers need to engage with the providers of capital to the banking system, rather than just talking to the banks, because ultimately you need a convergence in expectations,” he said in an interview with the Financial Times.
“They need to think about the way they set and talk about capital levels – not just as a technical regulatory exercise, but also a communication and market- influencing exercise.”