UPDATE 2-BoE’s King says UK, US closer than EU on regulation

LONDON, Feb 12 (BestGrowthStock) – 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 first formal quarterly meeting of the new
body — made up of 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.

FSA Chairman Adair Turner told the meeting that, while
Britain had pushed hard to implement internationally agreed
standards for remuneration in the financial sector, others were
dragging their feet.

The minutes showed the FSA had forced some banks to change
their pay plans. “Potential issues could arise if other
countries failed to follow the UK’s implementation of the
Financial Stability Board code in time for the 2010/11
remuneration round,” the minutes said.

“There needs to be an internationally agreed practical way
to further the commitments made at the G20 meeting,” according
to the minutes.

Policymakers worry that different approaches to regulation
across the world will encourage banks to take advantage by
shifting their operations to less strict jurisdictions and, in
doing so, create pockets of risk across the global system.

The minutes showed broad agreement between the three
authorities on how to improve Britain’s financial stability.

“The FSA Chairman (Adair Turner) agreed with the Governor
that banks needed to increase capital reserves and decrease
leverage steadily,” the minutes said.

“Like the Governor and the Chancellor (finance minister
Alistair Darling), the FSA Chairman said striking the right
balance would be critical so that lending was not curtailed.”
The three also agreed that major British banks, who received
considerable help from the government during the credit crisis,
should develop exit strategies from state support.

“The UK authorities should require all banks to draw up
concrete refinancing plans,” the minutes said.

The minutes also gave more details about the FSA’s piloting
of “living wills” at four financial firms as part of efforts to
wind down banks quickly without destabilising markets.

The pilot firms are due to submit draft recovery and
resolution plans to the FSA by the end of the first quarter.

The Council for Financial Stability was devised last year to
improve co-ordination between the Treasury, BoE and FSA in their
responses to threats to the financial system.

The Council may be shortlived as Britain’s Conservative
Party, tipped in the polls to win an election due by June,
reiterated this week it would abolish the FSA and make the Bank
of England solely responsible for banking supervision.

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(Reporting by Matt Falloon and Huw Jones; Editing by Andy Bruce
and Susan Fenton)

UPDATE 2-BoE’s King says UK, US closer than EU on regulation