BoE governor warns new banking rules are not enough
Bank of England governor Mervyn King has warned that a new set of rules for the world's banks will not be enough on their own to prevent a repeat of the financial crisis.
The new rules, announced last month and known as Basel III, will require banks to be hold higher reserves and are scheduled to be phased in from 2013.
"It is certainly a step in the right direction, an improvement on both Basel I and the ill-fated Basel II, and we should all welcome it," King said in a speech in New York on Monday.
"But if it is a giant leap for the regulators of the world, it is only a small step for mankind. Basel III on its own will not prevent another crisis for a number of reasons."
He stressed that it was no criticism of the measures to say they were not a "silver bullet" and said that there was "merit in having a basket of different measures to rein in excessive risk-taking."
Under the new rules, banks will be asked to hold higher reserves by January 1, 2015.
The key element known as core Tier 1 capital will be raised to 4.5 percent from two percent.
In addition, by January 1, 2019, banks will be required to set aside an extra buffer of 2.5 percent to "withstand future periods of stress", bringing the total reserves required to 7.0 percent.
The Basel Committee on Banking Supervision, representing regulators from 27 countries, is finalising the new measures.
© 2010 AFP