Posted on 20 March 2009
Some of the key points include:
- Institutional structure of regulation in the EU - The FSA sees the problem with cross-border passporting rights within Europe as part of a wider issue: there is too much home state control/responsibility given the current weaknesses in harmonisation of national rules and supervisory practices. Either host states need greater powers (i.e. a less open single market) or there needs to be a greater degree of European integration. The FSA favours a mix of both. Interestingly, it follows the Chancellor's response to the de Larosiere report in seeming quite relaxed about the formation of a new independent EU regulatory authority, provided it does not have power to supervise or intervene in the case of individual banks.
- Hedge funds - The FSA believes that regulators must have power to obtain information and indentify forms of financial activity which are developing bank-like characteristics, and if necessary extend prudential regulation to them or restrict their impact on regulated entities. However, it believes that hedge funds today are not in general bank-like: it believes their leverage is typically well below that of banks, they do not generally deal direct with retail clients and they have not promised their investors the ability to withdraw their investment on demand. So the FSA considers that regulators need to have power to obtain information about hedge funds, but that prudential regulation of these funds is not necessary at the moment.
- Counter-cyclical capital requirements
- Leverage limits
- Fair-value accounting
- Liquidity
- No institutional separation of "utility" banking and investment banking
- Cross-border bank branches
Related Link: The Turner Review
