BBA, responding to the Turner Review Conference Discussion Paper, stressed all planned reforms should include an impact assessment on the cumulative cost of regulatory changes on banks. BBA believes a concerted action plan by the FSB on behalf of the G20 is essential and should comprise:
- strengthening the resilience of the financial system including capital and liquidity requirements on banks, plus measures to mitigate interconnectivity;
- measures to reduce the impact and systemic effect of bank failure; and
- improving government and agency co-operation on regulation, supervision, crisis management and risk assessment.
It notes the UK has already taken the initiative in many areas but stresses there must be international agreement. Commenting on FSA’s discussion paper on systemically important banks, BBA says there must be a trade-off between requiring banks to hold more capital and liquidity and expecting them to lend to the economy. It thinks policymakers must see the whole picture and avoid concentrating on regulation to the exclusion of other important policy considerations. Its detailed comments look at possible approaches to defining what is “systemically important” and measures for addressing systemic importance.