Mortgage News
FSA mulls splitting banks’ activities
The FSA has said it is considering the separation of UK banks into deposit taking and trading subsidiaries in order to avoid a repeat of the economic crisis.
As part of his evidence to the Treasury Select Committee’s inquiry, Financial institutions – too important to fail?, Lord Adair Turner, chairman of the FSA, said the regulator was considering the enforcement of stricter controls on banks.
He said the regulator could implement recovery plans to enable banks to structure themselves into legal entities.
It could also impose high capital liquidity requirements, which would constrain credit supply during an economic upswing and lead to financial stability, he added.
Turner said: “We need tighter capital and liquidity controls on all banks and tighter controls to keep banks in check during the upswing.”
Alan Lakey, principal at Highclere Financial Services, said the imposition of higher capital requirements could be better than the separation of banks.
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He added: “The cost of restructuring institutions could outweigh any of the benefits which might be achieved. High-risk activity in other areas could still pose a major threat to the economy.”