Regulator warns against caving in on reforms

The global financial system is radically flawed and radical solutions are needed, so regulators must resist attempts to dilute proposed reforms, a top European watchdog said yesterday.

The worst market turmoil since the Great Depression has sparked a fundamental rethink of how banks and markets are supervised following the failure to spot the risks that led to the financial crisis.

But regulators fear the process could lose momentum as the world economy recovers and critics try to water down the proposed measures. "A lot of proposals for more stringent capital and liquidity requirements are currently up for consultation, but they are already meeting a lot of pushback from banks and politicians," Chairman of the Dutch markets regulator, Hans Hoogervorst, said at a conference in Australia.

"There is already huge resistance against this proposal," he said. His host country's central bank added its support to proposals for banks to hold more capital on their balance sheets against potential losses, even though the ideas have met with a cold reception from local lenders, which sailed through the global financial crisis nearly unscathed.

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