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.
“It’s a belt and braces approach that is needed with many belts and many braces,” King said.
“It won’t be easy to bring about and we shouldn’t plan to do it overnight and indeed one of the bigger reasons for not rushing into this is the need to ensure that the banking system … will still lend,” King told parliament’s Treasury Select Committee.