LONDON Oct 28 Supervisors should focus on
improving boards at top banks now their work on toughening up
rules was coming to an end, a group a report from a think-tank
of former central bankers said.
The 2007-09 global financial crisis unleashed a flurry of
new rules that will force lenders to hold more capital after
many of them had to be bailed out by taxpayers.
As those rules are being phased in, the Group of Thirty's
chairman, former European Central Bank President Jean-Claude
Trichet, said it was time to improve the quality of day-to-day
supervision of bank boards.
A "new paradigm" is needed to make the boards of big banks
take supervisory relations seriously and demonstrate that they
understand its importance to improve public trust, Trichet said.
"They need to be open to supervisors so supervisors can do
their job. More boards need to focus on risk culture," he told a
news conference at the Bank of England in London.
The 61-page report urged a shift away from bank's focus on
short-term profitability which has created a temptation to take
"High quality supervision is a lot less expensive than a
financial crisis," John Heimann, a former banking supervisor at
the U.S. Comptroller of the Currency said.
David Walker, a G30 member and chairman of UK bank Barclays
, said changing banking culture was hard and many
lenders were at the very early stages of a journey.
The report said banks and their supervisors have already
begun to work more closely but more needs to be done to tackle
"softer" issues like instilling the right culture.
The G30 recommendations echo steps taken in Britain where
top supervisor Andrew Bailey has called for a better "tone at
the top" to give employees at banks an example to follow.
Regulators gleaning lessons from the financial crisis found
overpowering chief executives dominating boards stuffed with
non-executives who did not fully understand risks in activities
such as financial derivatives and who failed to challenge CEOs.
A low point came in July 2012 when the Bank of England
pushed out Barclays' Chief Executive Bob Diamond after the
lender was fined for rigging the Libor interest rate benchmark.
Barclays' chairman also left and was replaced by Walker.
"Supervisors need to know that boards are doing an effective
job and to act appropriately if they are not," the report said.
"When difficult issues must be addressed at an individual
financial institution, or in times of financial system stress,
solid supervisory-board relations can help immensely in
achieving an expeditious solution," it added.