Prime Minister Gordon Brown said Britain needs to strengthen the Financial Services Authority as the Group of 20 nations move closer to coordinating a global approach for supervising banking systems.
“The world has changed beyond recognition, not just in the past 10 years but in the past 10 months,” Brown wrote in the Sunday Telegraph on Sunday. “Our system for financial regulation must change with it. This means a new tougher approach, addressing the new challenges, with a reformed, tougher and better-resourced Financial Services Authority at its core.”
Brown’s comments provide backing for a revamp of the FSA to be unveiled this week that would give the agency greater powers to restrict expansion of the banking system and supervise hedge funds. Finance chiefs from the biggest developed and emerging economies yesterday discussed regulation yesterday before pledging a “sustained effort” to end the global recession.
“Across the world, financial institutions need to be supervised not on what name they give themselves -- be it banks, hedge funds or investment funds — but on what they do,” Brown said. “We also need to ensure that all jurisdictions — such as offshore tax havens — and all important markets are covered by global supervision.”
Brown also backed proposals to raise banks’ funding requirements during times of prosperity.
“We will need to do more to make sure banks put aside more capital during the good times so that they are better insulated from downturns,” Brown wrote. “We need a workable means of ensuring that the FSA can tighten regulation if debt levels get too high.”
Turner proposals
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FSA Chairman Adair Turner will unveil a report on March 18 proposing a revamp of regulation, including how hedge funds are supervised, the role of credit-rating companies, as well as new rules for capital and liquidity. Turner will propose a role shared with the Bank of England to look at risk to the whole economy rather than individual companies.
Brown said that international cooperation on financial regulation needs to improve. “We will discuss with our G-20 partners how we take the first and most critical steps towards more coordinated global financial supervision,” Brown said.
G-20 finance chiefs and officials agreed on Monday to at least double the resources of the International Monetary Fund and said their key priority was to fix banks’ balance sheets.
“There was an agreement that everyone needs to act,” UK International Development Secretary Douglas Alexander said on the BBC’s Sunday AM show.
“I would expect that as we move towards the leaders meeting in a couple of weeks time there will be even more detail in terms of the work the IMF can do.”