Speaking at a dinner in Douglas, on the Isle of Man last night, Sir Howard said the G7 had become ‘very concerned’ by ‘dangerous gaps in the world’s defences against financial crime and financial instability’.
He said offshore centres would need ‘to demonstrate that they could and did meet international standards of best practice’. Otherwise, he warned, the future was ‘bleak’.
Sir Howard said the consensus from a recent Financial Stability Forum, an initiative set up by chancellor Gordon Brown to look at financial stability in world markets prior to the World Trade Centre bombing, was that regulatory standards at offshore centres were inadequate.
While the FSF concluded there was no evidence to suggest that OFCs were a major cause of ‘systemic problems’ in the world’s financial system as a whole, it ‘nonetheless concluded that poor regulation in many centres created a weak link in the supervision of the increasingly integrated financial system’.
Davies said the key recommendation of the FSF was that the International Monetary Fund undertakes an assessment of the standards of regulation in offshore centres.
The IMF will assess about 40 centres over a three year period using the standard of the Basel Committee for banking supervision, International Organisation of Securities Commissions for securities regulation and the International Association of Insurance Supervisors as a benchmark.
The Isle of Man reacted by saying it thought Sir Howard’s comments were constructive, but said Britain had problems of its own.
The island’s chief financial regulator John Aspden told the FT: ‘In many cases [leading economies are not in a position to be critical because their standards are below those in some offshore centres.’
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