Peter Praet, the executive director of National Bank of Belgium and a top European bank regulator, said a major flaw of international banking oversight is that there is not a uniform set of rules to address the dissolution of failing banks that operate in more than one country.
He said he told international regulators at a meeting in Singapore a few days ago that “the poorer your crisis resolution framework, the higher your capital” requirements should be. In other words, banks that operate in countries that can’t handle the collapse of these banks should force the companies to hold much more of a cushion to protect against potential failure.
“It’s absolutely key that we push that through,” he said at a Federal Reserve Bank of Chicago meeting on Friday.
He said some regulators were skittish about pushing too aggressively because of the fragile state of many countries’ financial markets. He said these officials were “a bit scared of going too fast in those things.”
“The situation of public finance will probably force you to be much more courageous,” he said.
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