Friday June 26, 12:16 AM
FACTBOX-Bank of England's top 5 proposals for regulatory reform
LONDON, June 26 (Reuters) - The Bank of England set out proposals for regulation of the financial services industry on Friday to avoid a repeat of the current financial crisis.
Following are the five key areas where the BoE said reform was needed in the June 2009 issue of its twice-yearly Financial Stability Report.
For a full story about the report, see
For a factbox on stability fears, see
1. Stronger market discipline
- making banks put in place plans to allow regulators to shut them down if needed without causing financial market panic
- funding deposit insurance via risk-weighted insurance premia
- more disclosure of volatility in banks' portfolios
- improved cross-border crisis management
2. Greater self-insurance
- higher levels of capital, consisting solely of equity
- counter-cyclical capital requirements, ie requiring banks to build up reserves in good times to draw down on in bad
- larger liquidity reserves consisiting of government bonds
- reduced reliance on ratings agencies
- regulating money market funds with a constant net asset value as banks
3. Improved risk management for whole financial system
- systemically important financial institutions should have higher capital requirements than similar non-systemically important financial institutions
- controls on economy-wide lending booms
- more use of central counterparties and exchanges to clear and trade securities, rather than banks dealing directly with each other
- greater international cooperation to avoid imbalances in national current accounts
4. Banks should not be too big or complex
- limits to the number of legal entities a bank is made of so that it is easier for regulators to understand and wind up
5. Clear principles for public safety nets
- governments should publish clear rules before a crisis hits for providing emergency capital and liquidity
(Reporting by David Milliken) Keywords: BRITAIN BANK/STABILITY PROPOSALS
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