Yesterday, the U.K. Financial Services Authority (FSA) published a Feedback Statement in response to the comments it received to the Turner Review and the associated discussion paper issued this past March to "stimulate debate on the causes of the [financial] crisis" and to make recommendations on the needed "global regulatory changes." The Feedback Statement sets out the FSA’s analysis of the comments received and reports on the progress made since March in implementing recommended changes and in achieving international agreement. The FSA reported that respondents who provided feedback to the FSA "generally agreed with the analysis of the Turner Review and the broad approach it proposed," and offered their "clear support for the analysis of causes, the main recommendations and the FSA’s supervisory approach."

The key issues raised by respondents were as follows:

  • An international approach is needed when looking at policy options;
  • Any measures implemented by the U.K. alone could damage London’s competitiveness;
  • Large firms oppose increased requirements for systemically important firms; and
  • The impact of the "whole package" of reform needs to be assessed.

In light of the London Summit G20 recommendation calling for "higher prudential standards" for systemically important firms, and the push for overall "wider debate," the FSA has "continued to develop" certain proposals on the overall approach to financial regulation, which "now require a more detailed analysis." Therefore, the FSA plans to issue a further discussion paper in October which will focus on key areas including:

  • Systemically important firms – In response to questions about how regulators should deal with "systemically important firms," the new discussion paper will address the issue of how to identify "systemically important firms, the policy tools available and how they might be applied."
  • Cumulative impact of capital and liquidity reforms – In light of the "need for a comprehensive analysis of the combined impact of the different elements of regulatory reform, such as stronger overall capital and liquidity requirements" and the associated "significant impact on leverage and maturity transformation in the banking system," the new discussion paper will consider methodologies for making "trade-offs" between "costs of intermediation and financial stability."

The new discussion paper will be published ahead of the second Turner Review conference, which is scheduled to be held on November 2, 2009.