FSA’s Turner wants new macroprudential body

Adair Turner, the chairman of the UK's Financial Services Authority (FSA), pushed on Wednesday for the creation of a new macroprudential committee to take over the task of preventing systemic risk build-up.

Speaking at the sidelines of the World Economic Forum in Davos, Switzerland, he told the BBC, a broadcaster, that his proposed macroprudential committee would be wedged in between the FSA and the Bank, and utilise the resources of both.

The role of macroprudential regulator is one the Bank of England has coveted. In November, it published an exhaustive and eagerly anticipated paper on the role of macroprudential policy, in which it outlined its vision of the tools, such as countercyclical capital buffers, that are being discussed on the global stage.

Turner concurred on the importance of a new approach to regulation. "We need a new set of macroprudential tools- not just interest rates- to address the quantity of credit," he told a meeting in Davos. These tools would come under the remit of a new committee that would review the situation in the markets and prescribe the use of the tools accordingly, he added.

The tools proposed by Turner were very similar to those outlined by the Bank last year. Its paper called for surcharges to banks' headline capital requirements and the application of risk weights to whole classes of lending to allow the regulator to rein in credit to overly exuberant sectors of the economy.

Turner, who is also chairman of the Financial Stability Board's (FSB) standing committee for supervisory and regulatory co-operation, acknowledged that the sort of change he was proposing would be easier to achieve at a national rather than an international level, and added that countries could implement it on a without having to wait for international coordination through the FSB or G20. The remark highlighted the difficulty of furthering international discussions on the specific details relating to macroprudential supervision, on which there has so far been much agreement but little concrete action.

Turner is expected to flesh out this proposal in a lecture due to be delivered in early March.