FSA has published feedback on the responses it had to the Turner Review and Discussion Paper it issued in March. Key points from the feedback include:
- on the whole, respondents supported the views and priorities FSA expressed in the paper, although many had particular views on one or more issues;
- FSA notes global agreements and developments in key areas identified by the Review and taken up at the London G20 Summit. The major concern was that, by implementing changes ahead of any other country, FSA risked making the UK uncompetitive. FSA agrees international co-ordination is paramount but said some changes, particularly to liquidity requirements, are so important it will press ahead with its planned implementation timetable;
- respondents also stressed the importance of international coordination;
- FSA received mixed responses on the implications of subjecting parent holding companies to direct powers. Bankers were particularly against direct regulation;
- most respondents agreed with FSA that a Glass-Steagall style approach would not be a good idea;
- most respondents did not favour a pre-funded EU-wide deposit guarantee scheme or more direct powers for Host State supervisors over branches, although they agreed the EEA branching system needs review; and
- on CRAs, respondents thought transparency and investor education could improve the role and responsibilities of CRAs but did not think investors’ risk assessments should completely replace ratings.
FSA will publish another Discussion Paper in October to focus on:
- systemically important firms: the paper will encourage more debate on how to identify such firms, the tools available for regulators to deal with them and how regulators should use them. It will include discussion on “living wills”, at domestic and international level. It will also include a discussion on whether these firms should be subject to different capital and liquidity standards and whether retail banks’ trading activities should be limited. It will also address the problems of “too-big-to-fail” and “too-big-to-rescue” institutions; and
- cumulative impact of capital and liquidity reforms: respondents were concerned about the overall effect on their businesses of each individual planned change. FSA will consider in the DP whether it may have to make trade-offs between costs of intermediation and financial stability. In the meantime, FSA will explain how it things banks and investment banks that are currently having high profitability should keep capital now in anticipation of higher regulatory requirements.
The paper also looks at the Turner recommendations against dependencies and action already taken, with planned next steps and timings.