Bloomberg News

U.K. Will Stay Out of European Banking Union, Turner Says

October 11, 2012

The U.K. won’t allow its lenders to be supervised by the European Central Bank, Financial Services Authority Chairman Adair Turner said in a speech designed to boost his candidacy for the top post at the Bank of England.

The U.K. “does not need to, and will not, be part of that Eurozone banking union,” Turner told financial executives in London yesterday. He also said regulators may further ease capital and liquidity rules if economic growth remains elusive.

European Union leaders in June embarked on plan to give the ECB oversight of the banking system in a step toward offering direct bailouts from the euro-area’s sovereign debt crisis fund. All 27 EU nations must approve the oversight proposal for it to move forward. Non-euro nations have called for assurance their voices won’t be drowned out.

“We have an enormous national self-interest in the Eurozone either taking the steps required to succeed, or, if that is politically unattainable, dissolving in a controlled rather than chaotic fashion,” Turner said.

Finance ministers have acknowledged the EU is unlikely to implement the new oversight regime by the start of 2013 as initially hoped. Any delays mean a longer wait for Spain, which is looking to hand off its financial-sector rescue to the 500 billion-euro ($647 billion) European Stability Mechanism once the new system is in place.

BOE Odds

The next governor of the Bank of England will have increased powers, including supervision of U.K. banks, to add to its monetary-policy remit.

Turner, who celebrated his 57th birthday last week, is 9/2 to replace Mervyn King as governor of the U.K.’s central bank, according to bookmaker Paddy Power Plc. Paul Tucker, currently deputy governor, is the favorite to get the job, while a winning 1 pound ($1.6) bet backing economist John Vickers would yield a 4-pound profit, according to the company’s website.

Turner has overseen a loosening in FSA requirements for banks’ to hold capital and liquidity buffers since June. He said regulators “need to be ready if these measures prove insufficient, to consider further policy innovations” to overcome “powerful economic headwinds.”

The FSA relaxed the amount of funds U.K. banks must hold against domestic lending last month. The regulator has also said it would include Bank of England liquidity measures in calculations of banks’ liquid asset buffers, giving lenders more room to dip into reserves.

Turner was appointed chairman of the FSA a week after the 2008 collapse of Lehman Brothers Holdings Inc. which triggered a financial crisis.

It felt like “being made captain of the Titanic after we’d hit the iceberg, but before we’d actually sunk,” he said yesterday.

To contact the reporters on this story: Ben Moshinsky in London at bmoshinsky@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net


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