Robert Jenkins, a former member of the Bank of England’s Financial Policy Committee, said banks have wrongly convinced government that measures to improve the safety of the financial system will curb growth.

“I fear that the banks have bamboozled government into believing that society must choose between safety and growth, between safer banks and bank shareholder value, and between a safer financial framework and a competitive City of London,” Jenkins said in an interview. “These are all false choices.”

His remarks echo criticism last month by former BOE Governor Mervyn King of lobbying by the banking industry for weaker regulation. Parliament’s Treasury Committee has since called for Chancellor of the Exchequer George Osborne to give assurances that banking regulators will be independent.

Jenkins, 62, joined the FPC in 2011, when it operated on an interim basis while the government overhauled financial regulation. He became known as one of the more outspoken members, accusing banks of lobbying “dishonestly” on the impact of new capital rules and calling for 10-year deferrals on bonuses. Osborne didn’t renew his appointment when the FPC’s powers were made official this year.

In his first interview since leaving the panel, Jenkins said the government has erred in refusing to require more stringent leverage limits than those proposed by the Basel Committee on Banking Supervision.

“This is both tragic and sad,” Jenkins said. He added that investors and depositors would pull their money out of banks that run on low levels of capital more quickly than safer firms during times of financial instability.

‘Busted Flush’

The Basel rules allow banks to hold 3 percent of loss-absorbing equity against assets, less than the 4 percent recommended by the U.K.’s Independent Commission on Banking and the Parliamentary Commission on Banking Standards. Osborne also hasn’t yet given the FPC power over leverage ratios at banks.

“Basel III is a busted flush,” Jenkins said. “The banking lobby would be only too happy to settle for these ‘tough, new rules.’ The taxpayer should not.”

Jenkins, who has previously worked at Citibank and Credit Suisse Group AG, described Barclays Plc as the “poster child for excess leverage” given that its balance sheet is about the same size as Britain’s economy and it has a 2.5 percent equity cushion, according to BOE calculations based on anticipated losses. Barclays Chief Executive Officer Antony Jenkins said last month that the London-based bank may have to cut lending if regulators press for the 3 percent level to be met before 2015.

Barclays spokesman Giles Croot declined to comment when contacted by Bloomberg.

U.S. Push

The former FPC member said U.S. proposals announced this week to set a 5 percent ratio are a “step in the right direction.” One sticking point will be how derivatives are included in the calculations.

“These developments undercut the argument that more restrictions on leverage here in the U.K. will cause Britain’s banks to decamp to New York,” he said. “It is one of several guns that bankers have held to the government’s head. The gun is filled with blanks.”

In addition to Jenkins, Michael Cohrs and Alastair Clark were also not selected to remain on the 10-member FPC and have been replaced. Jenkins said what surprised him most during his time on the panel was the absence of a “banker-statesman” among the current crop of British bank chief executives.

“Name one who has acknowledged the industry’s failings, embraced the need for reform and then got out and worked with wisdom, humility, selflessness and objectivity to structure a sound, stable and fair financial system,” he said. “Most have fought the regulatory agenda. None has got out in front of it — much less set it. Society deserves better of the financial leaders who claim to be serving society.”

Jenkins said he plans to continue speaking out on regulatory reform. He’s now a professor at the London Business School and a senior adviser to CVC Capital Partners Ltd., one of Europe’s largest private-equity firms.

“I have turned in my badge but not hung up my guns,” he said.