FSA chief keeps focus on capital requirements

by Gill Montia

Story link: FSA chief keeps focus on capital requirements

Financial Services Authority (FSA) chief, Lord Turner, has warned that a more optimistic economic outlook should not be allowed to detract from plans for a radical reform of the capital requirements and remuneration policies of the UK’s banks.

Appearing before the Treasury Select Committee, Lord Turner referred to recent “aggressive hiring” at some investment banks with the danger that bad habits could return.

However, according to a report in The Telegraph, he was more concerned that banks focus on their capital ratios, while acknowledging that this would result in lower profit, in return for lower risk.

For global institutions he would like to see capital ratios that allow “standalone” banks in each country of operation, pointing out that this could have limited the fallout from the Icelandic banking meltdown.

In related news, the FSA has today reported that it continues to find weaknesses in the way specialist lending firms and third party administrators are handling mortgage arrears and repossessions.

As a result, four firms have been referred to enforcement for investigation and several more firms are being assessed for referral.

In many cases the regulator found a high incidence of mortgages moving straight into arrears and potential breaches of responsible lending rules.