MNI: BOE Haldane: Makes Case To Extend, Refine Financial Regs

By David Robinson

     LONDON (MNI) - Bank of England Chief Economist Andrew Haldane gave a speech

on Rethinking Financial Stability at the Peterson Institute in Washington

Thursday, focussing on where financial regulation should head next.

     Haldane said research showed that financial regulation had brought about a

more resilient financial sector in the wake of the global financial crisis, but

it needed to be extended and refined rather than being rolled back.

     "History is replete with examples of regulatory standards being diluted or

dismantled in the name of enhancing the dynamism of the financial system and the

economy," and to do this again would be to ignore the lessons of history, he

said.

     Instead he set out how regulation needed to develop. Models of financial

stability are still fragmented, with no unified framework and amplification

mechanisms are hard to capture.

     Bank stress tests need to incorporate systemic risks from non-bank sectors,

and feedback loops in a crisis from the potential fire-sales of assets and

liquidity hoarding. Liquidity facilities by central banks also need to be

enhanced and risks from the financial technology sector explored.

     "Given the scale of regulatory change over the past decade, this new

regulatory framework will plainly need to adapt in the period ahead in the light

of the new evidence, experience and incentives associated with operating it,"

Haldane said.

     His presentation made no reference to UK monetary policy or the current

economic conjuncture.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

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