Finance chiefs warn of another banking crisis

17th March 2011

After a blast from the Governor of the Bank of England Mervyn King at the start of the month, this week it was the turn of Financial Services Authority chairman Adair Turner.

Bloomberg reports Turner's concerns here  including the fact he believes creditors should take a bigger hit when banks get into trouble, a concept popularly known in investment circles as taking a haircut though Turner seems to think it should be more than just a trim.

But Turner doesn't want banks to fail at all and has suggested that the amount of capital they should be required to hold should be as high as 15 to 20 per cent of their risk assets.

That is much higher than the planned 7 per cent required under Basel III, named after the European city that straddles the Swiss, French and German borders and which houses another bank supervisor the Bank for International Settlements.

The reform will be phased in from next year but the provisions come fully into force in 2019.

King caused headlines earlier this month when he gave an interview to the Telegraph suggesting the world was at risk of another banking crisis.

2 thoughts on “Finance chiefs warn of another banking crisis”

  1. Anonymous says:

    So, your base scenario is a debt servicing lifeboat for financial institutions maintained under a deceit that other tax payers money is being productively invested in building and reforming an uncompetitive economy – this being a ‘rational’ position that the masses might rumble? I am interested in what moral compass is being used for the analysis.

  2. Anonymous says:

    On Monday I asked the following question in Sean Richards blog: ” mcgrathr20 1 day ago

    Can anyone tell me if there is a groundswell, especially in
    Germany, for firing Greece from Euroland?    Is there any cogent reason
    why this wouldn’t be a good idea?”     This question is to me the nub of the problem.   I think you have given an answer to the second part of that question though I am not sure about a massive capital flight from the other peripheral nations, because I would imagine that should have already happened, though proof would be nice.    The way I see it: there does seem to be a political groundswell in Germany against any more involvement in bailouts.   If I were German I’d like to see Greece asked to leave the Eurozone and German banks bailed out with the money saved, similarly for France.   Rather than weaken the Union I think it would strengthen it and it would give meaning to the idea that national banks are responsible, and if not then they should be asked to leave.   The alternative, and this is maybe what some governments are planning on, is more fiscal integration.   But this alternative would take years to bring about, and that is time the Eurozone doesn’t have.

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