Banks should not play games over capital: FSA's Turner

LONDON Wed Dec 5, 2012 12:09am IST

The chairman of the Financial Services Authority, Adair Turner, leaves Downing Street in central London May 28, 2012. REUTERS/Neil Hall

The chairman of the Financial Services Authority, Adair Turner, leaves Downing Street in central London May 28, 2012.

Credit: Reuters/Neil Hall

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LONDON (Reuters) - Banks should not use a delay in the introduction of new global capital rules in the United States as an excuse for postponing their adoption in Europe, the head of Britain's financial watchdog said.

The European Union is expected to follow the United States in delaying Basel III global capital rules set to be implemented on a phased basis from January.

European banks have been lobbying for this delay, which was expected to be at least six months. They fear ending up being at a competitive disadvantage to U.S. rivals if the rules were not introduced at the same time.

Financial Services Authority Chairman Adair Turner, speaking at a conference on Tuesday, said big U.S. banks would still be "overtly and explicitly" required to meet standards beyond the Basel III targets under their 2013 stress tests.

"It is very important to make that point and to not allow the continuation of the game where people refer to something that has happened on the other side of the Atlantic and suggest that we can weaken as well," he said.

Turner is a member of the global Financial Stability Board, which oversaw the drafting of Basel III, rules that will triple the amount of capital banks hold compared with the 2007-09 crisis, during which taxpayers had to rescue many lenders.

The "disappointing" U.S. decision not to meet the 2013 start date for Basel III was discussed at an FSB meeting he attended in New York last week, Turner said.

Echoing a statement put out by the FSB after the meeting, Federal Reserve Governor Daniel Tarullo said at a conference in the U.S. capital that there was a commitment on both sides of the Atlantic to comply with the new capital rules.

"I don't think there's any question (as to) the continued commitment to the Basel III package," Tarullo said in answer to a question from the audience after a speech on regulatory reform. Tarullo had also been at the meeting.

"I don't detect any diminution in commitment to the Basel III package," said Tarullo, who plays a leading role on regulatory issues at the U.S. central bank.

However, the FSA's Turner warned that there was a danger regulators could become overly cautious as a result of the "huge mistakes" made before the crisis.

"We do have to make sure that we develop a supervisory approach that is robust where it needs to be but that is not always hyper cautious just for its own sake."

The FSA is being scrapped in April and replaced with a new supervisory regime.

(Additional reporting by Douwe Miedema in Washington; Editing by Dan Lalor and Steve Orlofsky)

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