On October 22, 2009, the Financial Services Authority published discussion paper 09/4 entitled "A regulatory response to the global banking crisis: systemically important banks and assessing the cumulative impact". The publication follows Lord Turner's initial regulatory review paper published in March ("The Turner Review: a regulatory response to the global banking crisis") and focuses on two significant issues: how to control the risks posed by systemically important banks and how to assess the cumulative impact of capital and liquidity reforms.
Systemically important banks
The discussion paper describes the problem created by systemically important banks which are seen as either "too big to fail", "too inter-connected to fail" or "too big to rescue", although the FSA explicitly recognises that other firms and infrastructure providers can also be "systemic". Three distinct concerns are highlighted in this respect:The "moral hazard" created by the belief of uninsured creditors
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