INTERVIEW – Britain’s FSA seeks to shape regulatory debate

October 9, 2009

By Huw Jones
BASEL, Switzerland, Oct 8 (Reuters) – The UK’s Financial Services Authority hopes its rapid introduction of tougher liquidity rules for banks will help speed up and shape global rulemaking, its new international director said.

The FSA on Monday published new rules on how banks must start to build up a cushion of liquidity — cash or government bonds — to help them withstand sudden shocks without taxpayer help.

“This on the one hand is providing the urgency where it’s needed and also it does provide some thought leadership as well about where do we think global outcomes should settle,” Verena Ross told Reuters in an interview on Wednesday evening.

“We might win some of those and we might lose some of those,” said Ross, who began her newly-created job this month as the FSA steps up efforts to shape global and European Union financial rulemaking that has gone into overdrive.

Some regulators privately accuse the FSA of “frontrunning” or trying to impose its model on the rest of the world while banks in Britain worry about being at a disadvantage.

“Clearly we have learned quite painful lessons, particularly on liquidity which has led us to say we can’t just wait for a long period. Global standards can take time to emerge, that is just a fact of life,” Ross said.

The Basel Committee on Banking Supervision is due to publish draft global standards on liquidity in December followed by consultations but there is no date for implementing them.

“We will go back to our national standards and we will revise them if the global standards come out in a different state,” Ross said.

Britain and the United States are seen as the main centres for the worst financial crisis since the Great Depression, highlighting regulatory failures there in particular.

Critics say this has put Britain on the back foot in terms of being able to lead on financial rulemaking.

“That’s a challenge. We do need to overcome some of those views and prejudices. We have tried to do that by being frank and open about the mistakes that we have made,” Ross said.

This has won the FSA quite a lot of ability to influence the global regulatory debate, she said.

Ross is keen to increase FSA influence over the global rulemaking process spearheaded by the G20 and the Financial Stability Board.

But financial laws applied in Britain are made at European Union level such as the draft law to regulate hedge funds which the UK wants to radically change.

“Yes, of course, it’s the EU which ultimately drives and directs regulatory requirements but they are not doing that in isolation either. Europe is not an island,” Ross said.

Later this month the FSA will also seek to shape the global debate on “living wills” for banks and how to identify systemically important banks — and therefore apply tougher oversight and capital charges.

“We need to outline something which people can then agree with or disagree with. Someone needs to step forward with ideas otherwise we don’t get anywhere,” Ross said.

(Reporting by Huw Jones; Editing by Ruth Pitchford)
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Thursday, 08 October 2009 10:48:14RTRS [nL8276956 ] {C}ENDS

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