Lord Turner publishes review of crisis
Lord Adair Turner this week unveiled his much anticipated review of the financial crisis, in which he explains the causes of the credit crunch and outlines proposals to prevent similar economic meltdowns in the future.
Lord Turner, chairman of the Financial Services Authority (FSA), identified the three main causes of the credit crunch as macro-economic imbalances, financial innovation of little social value, and significant deficiencies in regulation on bank capital and liquidity.
He proposed a number of regulatory changes that he said would create a banking system that looks very different from that of the last decade.
The new system will include rigorous regulation of ‘shadow’ banking institutions that pose systemic risks, such as hedge funds.
Other recommendations included establishing a new European regulatory authority to supervise cross-border banking, and stronger national supervisory powers over foreign banks.
“The changes recommended are profound, and the banking system of the future will be different from that of the last decade,” Lord Turner said.
“The world’s economy will be better served as a result.”
He added: “A global market economy remains the best means of delivering global prosperity: it requires a global banking system focused on serving the needs of businesses and households, not in taking risks for quick return.”
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