| LONDON, June 4
LONDON, June 4 Britain's finance minister George
Osborne voiced confidence on Tuesday that politicians and
regulators from major economies will achieve a framework for
sorting out problems with bank regulation within six months.
The Financial Stability Board, the regulatory arm of the
Group of 20 leading economies (G20) that is chaired by Bank of
England Governor Mark Carney, is targeting a G20 meeting on Nov.
15-16 in Brisbane, Australia, for resolving questions such as
how to handle big, multinational banks if they hit trouble.
"We need to have an end to the process to bring some
certainty to the issues, and Mark (Carney) has set the Brisbane
G20 summit as the point where we can get the global political
agreement achieved, and I am confident that timetable is
possible," Osborne said at a bank industry conference.
Regulators are putting in place a complex jigsaw of rules
and mechanisms to wind down failed banks without the the drastic
fallout seen when Lehman Brothers went under in 2008. Osborne
said finance ministers and the FSB need to "make that all
coherent and work for global institutions."
The aim is to shield taxpayers, who had to shore up lenders
in the 2007-09 financial crisis, from the cost of ensuring that
a bank's essential services, such as its payments system, can
Regulators see solving the "too big to fail" problem as key
to restoring trust that globally coordinated rules can work
rather than each country going it alone.
Key questions are what sort of creditors should be 'bailed
in' to help recapitalise a bank in trouble, whether that
loss-absorbing capital should be held by parent banks or held by
subsidiaries in each country, and amending derivatives contracts
to give regulators time to wind down a bank that has failed.
Osborne was speaking at the start of a 3-day meeting in
London of the Institute of International Finance (IIF), the
trade group for banks, insurers and other financial firms.
"I do understand that people in finance and banking have had
to put up with a lot of regulatory change in the last few years,
but that's not surprising when you have a banking crisis and
taxpayers are forced to put a huge amount of money into banks,"
Davide Serra, founder and CEO of Algebris Investments, which
specialises in the financial sector, criticised the scale of
regulatory change that has been unleashed since the crisis and a
lack of coordination between European and U.S. regulators.
"Because of the weakness of some business models ... we
ended up having a massive regulatory backlash," Serra said.
Last week International Monetary Fund chief Christine
Lagarde said bank industry reform had been slowed and hampered
by fierce industry lobbying, but a senior regulator said on
Wednesday rules will never be perfect and regulators need to "be
humble" about shortcomings.
"In a highly dynamic world, imperfect knowledge leaves
regulatory design permanently in catch-up mode," said Jaime
Caruana, general manager of the Bank for International
"As soon as a rule, simple or complex, becomes a binding
financial regulation, it will cause changes in financial
institutions' risk management that will make it less binding and
less effective," he said, referring to this as a "regulatory
(Reporting by Steve Slater; Editing by Ruth Pitchford)