On March 18, the UK Financial Services Authority (FSA) published the Turner Review: a regulatory response to the global banking crisis, together with Discussion Paper 09/02, which sets out the FSA’s specific proposals. Together they form an exceptionally important regulatory initiative. Clearly the timing is designed to influence the G-20 Summit scheduled to take place in London, chaired by the UK, in early April.
The Review considers the underlying causes of the current financial crisis and in recommending a regulatory response stresses the importance of future regulation and supervision being based on a different approach. Among its recommendations are:
- fundamental changes to bank capital and liquidity regulations and to bank published accounts, enhanced capital requirements to support risky trading activity, and counter-cyclical capital buffers;
- increased reporting requirements for unregulated financial institutions such as hedge funds;
- regulation of credit rating agencies;
- regulation of remuneration policies; and
- major changes in the FSA’s approach to supervision and regulation (building on the new approach described in the speech of FSA Chief Executive Hector Sants, as reported in the March 13, 2009, edition of Corporate and Financial Weekly Digest).