City warns of flaws in living wills proposal
THE CITY yesterday flagged up flaws in proposals that will force banks to write “living wills” to help regulators wind them up in the event that they collapse.
Chancellor Alistair Darling said yesterday that the government was planning to introduce legislation in November which would require banks to make their corporate structures more simple and provide detailed plans on how they could be dismantled.
And it is understood that the FSA is already working on the proposals, which will require banks to detail what businesses they would sell to raise funds and how they will wind up their trading books within 60 days of a potential failure.
But banking figures warned yesterday that the plans, first mooted in Darling’s white paper on regulatory reform earlier this year, would be difficult and costly to implement.
A spokesman for the British Bankers’ Association said: “We can see the need for banks to do more in terms of their contingency planning.
“But we become concerned when the proposal is turned into one in which heavy regulatory intrusion to impose a particular business model is envisaged,” he added.
NCB analyst Simon Willis backed comments from Standard Chartered chief executive Peter Sands that the move could destabilise markets, because counterparties would be less cautious about the institutions with which they do business.
Financial Services Authority (FSA)chairman Lord Adair Turner has already expressed his support for the proposal, which was first outlined in the chancellor’s white paper on reform of the regulatory system earlier this year.
But like Sands, Barclays finance director Chris Lucas has come out against the idea, which he has said would be “severely complicated”.