The ability to identifying emerging systemic risks will always remain highly imperfect, Turner noted. “The more fundamental change is to create a financial system with more shock absorbers."
Speaking at the BBA, the FSA chairman underlined that excellent supervision is a necessary but not sufficient condition to prevent future crises. “We will do better supervision in future, but unless we change the rules quite radically, we will not be able to avoid future crises”, Turner stated.
“The more fundamental change is to create a financial system with more shock absorbers”, he said. However, he also warned to be very careful of the transition path to any higher capital ratio regime.
Lord Turner identified three interconnected issues where the FSA’s own thinking had progressed since the publication of the Turner Review. These include
- How to deal with banks which are too-big-to-fail;
- How to deal with cross-border banks;
- Narrow banks and investment banking: whether it is possible to achieve a legal separation.
“It is up to the banking industry itself to restore an appreciation of the positive role which banking can and must play and to create a culture focused on delivering necessary services to customers", Turner said.
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