Less discussion, more action

22 October 2009 By George Hay Follow @gfhay

Days after the BoE s governor said breakups were the only way to make banks safe, the FSA has set out an intelligent alternative based on capital and liquidity reforms. If only the regulator was pushing its agenda as aggressively and provocatively as Mervyn King.

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The Financial Services Authority has restated that the dangers posed by banks deemed to be too big to fail can be eased by capital and liquidity reform.

The FSA's discussion paper, published on October 22, reiterated the UK regulator's support for capital surcharges for systemically important banks, as well as the potential to impose a similar levy on banks that resisted reorganising their operations into national subsidiaries, each with their own capital and liquidity reserves.

The FSA's emphasis on surcharges and living wills differed from the stance of the Bank of England, whose governor Mervyn King used a speech on Monday to argue for banks' utility functions to be split off from their trading arms.

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