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FSA Report to Call for Tougher Regulation of Banks

Wed, 18 Mar 2009

The Financial Services Authority (FSA) will today publish a report recommending a revamp of global banking regulation as it looks to prevent a recurrence of the crisis crippling the British economy and economies around the world. The blueprint was commissioned by Prime Minister Gordon Brown last October. The report is of particular significance as it will shape Britain's response to the new EU rules on hedge funds, private equity, bank capital and cross-border supervision.

Within the report, it is recommended that there should be an increase in banks' minimum capital requirements, whilst the blueprint also calls for a closer regulation of hedge funds. Indeed, the whole report, authored by FSA Chairman Adair Turner, offers a harsh tone outlining the FSA's determination to take a tougher stance after the events of the past 18 months.

Analyst at Exane BNP Paribas, Ian Gordon, said, 'Levels of equity held by banks will be higher through the cycle and most banks are now aspiring to return to mid-teens returns on equity. That's already tacitly accepted and baked into capital planning.'

However, legal experts have warned that such a tough approach could trigger an exodus of banks away from the City of London.
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