Carney Sceptical On Using Volcker Rule For Banks
Britain's plan to safeguard retail banking is a far better idea than the U.S. approach of forcing banks to hive off speculative trading, the Bank of England's next governor told MPs, Reuters reported. Mark Carney is to take up the reins in July, three months after the central bank becomes Britain's main regulator for lenders. In the wake of the financial crisis, regulators are introducing measures to shield the deposit-taking business of big banks from high-risk practices, reducing the prospect of a big failure that could destabilise markets and force a government bailout. The United States is implementing a reform known as the Volcker Rule to ban proprietary trading, in which banks take speculative bets on the market with depositors' money. Britain's government this week said it would implement the so-called Vickers reform, which requires separate, extra capital for the deposit-taking arms of banks, by 2019. "No, I don't think you should overlay a Volcker Rule on the Vickers recommendations. The ring-fence model is the superior model," Carney told a UK parliament treasury select committee hearing into his appointment. "It's extremely difficult to draw the line between market-making and proprietary trading ... It would unnecessarily divert the supervisors' attention from ensuring the ring fence is respected," Carney added. Read more.