Extra supervision alone will not prevent banking crises, says Lord Turner

Increasing supervision will fail to stop future banking crises, warned FSA
chairman Lord Adair Turner.

He said that supervision was necessary but would not keep financial stability
in check. Rules applied to banks would need to be radically altered, reported
the
FT.

‘One clear need is to get better at identifying emerging systemic risks and
to create tools that can act against these risks at the macro level,’ he said at
the annual British Bankers’ Association conference.

‘But it is essential to recognise, however much we improve our ability to see
bumps in the road ahead, that ability will remain highly imperfect.

‘So the more fundamental change is to create a financial system with more
shock absorbers, and the shock absorbers of the banking system are capital and
liquidity.’

Dealing with the design of rules for banks that are too big to fail,
cross-border banks and the legal separation of narrow banks and investment
banking were the key issues for the industry to deal with.

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