FSB's Draghi says mulling bank failure agency

Sat Jan 30, 2010 12:39pm EST
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By Krista Hughes and Natsuko Waki

DAVOS, Switzerland (Reuters) - Global regulators are working on proposals for a central agency to manage bank failures, Financial Stability Board chief Mario Draghi said on Saturday.

"No matter where the failure would come from, no matter how big the institution is, we want to be in a position to manage this failure in an orderly fashion," he said in an interview with Reuters Insider television.

"We want to have an authority or an agency or whatever which has the power, the funds, the budget and the competence to manage failure in an orderly way."

A spokeswoman for Draghi said the FSB was working on a mechanism based on common principles to be followed in the resolution of national bank failures.

Draghi said bankers and regulators meeting at the World Economic Forum in Davos had agreed that measures on bank capital, liquidity and legal structures, such as splitting off banks' trading operations, should be coordinated globally.

"We have to have a common floor and each country should be free to be, in a sense, more demanding than the common floor, each country should be free to be tougher vis a vis certain banks than the common floor. Not weaker," he said.

"I'm getting a sense that the industry is understanding more about the systemic implications, more than in the past."

Countries like Britain and the United States have already come up with their own bank plans, with the U.S. proposing limits to banks' size and trading activities.   Continued...