The Turner guide | FT Alphaville

The Turner guide

Presenting a (very short) FT Alphaville summary.

The full review is here, including a worthwhile overview of the financial crisis to date, in section one (p. 29-61).

FSA chairman Lord Turner’s more salient recommendations from section two are as follows:

  • A cap on gross leverage (p. 67).
  • Creating counter-cyclical capital buffers (p. 61) and the inclusion of “economic cycle reserves” in banks’ accounts.
  • Regulating credit rating agencies (p. 76).
  • Figure out a way to structure pay so that it doesn’t encourage excessive risk taking (p. 79).
  • Regulation of SIVs and other offshore entities (p.70).
  • A tougher approach from the FSA, including possible oversight of banks’ accounts (p. 88).

Underpinning the entire report seems to be this paragraph from p. 42.

… the acceptance that financial markets are inherently susceptible to irrational momentum effects does imply that regulatory approaches should be based on striking a balance between the benefits of market completion and market liquidity and the potential disadvantages which may arise from inherent instabilities in liquid markets. …

Regulation, thy name is truly Turner.

Related links:
Lord Turner review – FSA
Discussion paper – FSA
FSA calls on banks to hold more capital – FT