Comments on the UK FSA “The Turner Review” and its Discussion Paper 09/2 (DP09/2) [40 KB]
We, Japanese Bankers Association, are pleased to announce that today we have submitted our comments to The Turner Review and the related FSA Discussion Paper 09/2: A regulatory response to the global banking crisis (March 2009) (DP 09/2).
We are aware that international discussions in terms of strengthening capital adequacy standards are ongoing. In this regard, we recognize that the points discussed in The Turner Review have significant implications for the future direction of the bank capital regulation. Therefore, we take this opportunity for submitting our comments. Key issues are listed below.
- We believe that further market turmoil caused by the hasty introduction of new regulations by some countries should be avoided. In response to the global financial market turmoil, a new global regulatory framework should be established under the discussion of international bodies such as the Basel Committee.
- We would like to confirm that the discussions leading to tighter regulations should be conducted in a cautious manner, until an economic recovery is assured. Discussion over the quality and quantity of capital would significantly impact on the financial markets and therefore, any response should be made in a prudent manner. In particular, international consensus should be made with regard to the definition of “Core Tier1 ratio”, which may require a minimum ratio of 4%, and other relevant issues raised in The Turner Review.
- In case of introducing new measures such as “leverage ratio” and “core funding ratio”, etc. as a new regulatory framework, regulators should take into consideration multiple effects that would incur on a comprehensive basis. We view that any regulation which aggravates procyclicality should be avoided. Therefore, deliberate quantitative impact studies before implementation are necessary to be conducted.