Financial Regulatory Forum

Regulatory forbearance looms as next big supervisory risk for financial giants

By Susannah Hammond

LONDON/NEW YORK, Sept. 9 (Thomson Reuters Accelus) – Regulatory forbearance is not a concept that has hit many headlines. It is, however, emerging as an underlying theme in publications by a range of bodies, from the International Monetary Fund (IMF) to the European Union and beyond. Regulatory forbearance is not about supervisory incompetence but, rather, the potential for a fully briefed regulator to decide not to intervene. There may be many legitimate occasions when non-intervention is the right call but, when judged with the benefit of hindsight, more supervisory interventions, made sooner, could have ameliorated some of the worst of the issues arising out of the financial crisis.

As Bank of England governor Sir Mervyn King stated, taking away the punchbowl when the party is in full swing is never an easy decision to make. Regulators, however, must be both capable and willing to take tough interventionist action. Regulators making such difficult decisions need to be assured that they have the backing of the international financial services community, the support of their domestic political masters and, perhaps to a lesser extent, the understanding of the public.

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Impact analysis: UK outline of new approach to financial regulation

By Susannah Hammond

LONDON, Feb. 24 (Complinet) -The British Treasury’s latest proposal for reshaping financial regulation, published last week, has given more detail to the plans set out in an outline last summer. The fundamental shape of the new bodies now looks to have been finalized, but many fine points on how the new approach will actually function in practical, operational and cultural terms are still under consideration.

Following is a discussion of the major elements of the consultation, “A new approach to financial regulation: building a stronger system,” and how they may affect the UK financial industry:

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FACTBOX-UK fleshes out financial supervisory shake up

July 26 (Reuters) – Britain detailed on Monday how its new financial supervisory regime will work from 2012 in a move that scraps the Financial Services Authority and turns the Bank of England into one of the most powerful central banks in the world.

Supervisors will be required to intervene more in day-to-day operations of banks, insurers and markets to nip risks in the bud before they destabilise the broader financial system.

The reform abolishes the discredited “tripartite” system of the FSA, the government and the Bank of England working together to supervise Europe’s biggest money centre.

ANALYSIS-UK bank changes will be outweighed by EU

By Huw Jones

LONDON, May 12 (Reuters) – The new British government will make the Bank of England responsible for spotting asset bubbles as part of global efforts to learn from the financial crisis but the new set-up will still be overshadowed by EU centralisation.

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ANALYSIS-Central banks’ police job may cloud monetary tasks

  By Krista Hughes and Mark Felsenthal
   FRANKFURT/WASHINGTON, April 26 (Reuters) – Major central banks are taking on a new role of finance police in the wake of the global financial crisis but they could find their hands more tied as a result. (more…)

Bank of England’s King says UK, US closer than EU on regulation

It's closer across the Atlantic

It's closer across the Atlantic

 (Updates with more quotes, details from report)

LONDON, Feb 12 (Reuters) – Britain and the United States are more convinced of the need to force banks to hold more capital than some big European nations, Bank of England Governor Mervyn King told the Council for Financial Stability last month.

The minutes of the meeting between the BoE, the Treasury and the Financial Services Authority on Jan. 14, published on Friday, showed King felt the task of getting nations to agree to stricter rules for banks “should not be underestimated”.

The G20 group of developed and emerging nations has been looking at ways to strengthen regulation after the credit crisis but there have been concerns that a show of unity at the height of the crisis may fall apart as the global economy recovers.

BoE’s King says far too soon to say easing program is finished

Options open

Options open

By Sumeet Desai and Matt Falloon

LONDON, Feb 10 (Reuters) – The Bank of England may have to pump more money into Britain’s fragile economy, Governor Mervyn King said on Wednesday after the central bank forecast inflation would stand well below target in two years.

Presenting the BoE’s quarterly Inflation Report, King said recovery from the worst recession since World War Two would be slow with output below pre-crisis levels for some time to come.

And that gloomy outlook did not even take into account the likelihood of fiscal policy being tightened hard after an election expected on May 6.

Bank of England halts quantitative easing, leaves door open for more

LONDON, Feb 4 (Reuters) – The Bank of England announced on Thursday no increase to its unprecedented 200 billion pound asset-buying programme, but left the door open to more so-called quantitative easing if economic conditions deteriorated.

It also left UK interest rates at a record low of 0.5 percent, as expected.

Almost all analysts had predicted a pause in the programme after 11 months of pumping newly-created money into the economy but sterling rose and gilts fell as some traders had positioned for an increase, given the fragility of the economy which has only just come out of recession.

The BoE said that, on balance, the prospects were for a gradual recovery in the level of activity but the high level of spare capacity in the economy after the recession meant inflation would fall below the target for a period.

BoE’s King calls for radical reform of banks

By Tim Castle

LONDON, Jan 26 (Reuters) – Radical reform is needed to make the banking system safer, Britain’s top central banker said on Tuesday, adding U.S. President Barack Obama’s plan to curb some activities would not fully solve the “too big to fail” problem.

Bank of England Governor Mervyn King said there was no “silver bullet” to solve the banking sector’s problems, and tinkering with regulation alone, such as bumping up capital and liquidity requirements, would not be enough when “stuff happens”.

Radical reforms were also needed to change the liability structure of the banking system, so creditors can’t simply walk away unscathed when a bank fails, King said.

Bank of England, U.S. FDIC to work closely on banks in distress

LONDON, Jan 22 (Reuters) – The Bank of England said on Friday it had signed an agreement with the U.S. Federal Deposit Insurance Corporation to work more closely when resolving distressed banks with operations in the U.S. and the UK.

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