Lord Turner eyes bank reform by November G20 meeting

The chairman of the Financial Services Authority (FSA) yesterday said that the next eight months are crucial in agreeing an international framework for banking regulation.

Speaking to the House of the Lords Economic Affairs Committee, Lord Turner said that international discussions on issues such as bank capital were "moving in the right direction," but warned that the issues were complex. The Financial Stability Board, which represents the G20 group of leading economies, is due to report on progress during November's main G20 summit in Seoul.

"We have a demanding programme over the next six or seven months," he said. "And we now have to turn the international agreement in principle, into actual figure work. We are at the stage where we need to agree, over the next six or seven months, on what the figures are."

In a wide-ranging discussion on financial regulation, Lord Turner said that the City watchdog had investigated whether or not to impose loan-to-value limits on mortgages, but that the City watchdog was yet to reach any firm conclusions. He did say, however, that the FSA may step in to ban mortgage products that were "so unlikely to make sense".

Lord Turner also criticised the ratings agencies, which have come under heavy pressure over the last two years following the inability of the likes of Moody's and Standard and Poor's to accurately predict the collapse of markets, such as that for securitised mortgages. "There were clearly conflicts of interest, and in some cases it seems that the agencies put the rating on a security that the issuer wanted," he said.

However, for investors, such as charities, ratings on simpler assets like corporate bonds were still useful, he added.

He also dismissed the suggestion that the so-called naked CDS market, where traders buy insurance for a financial products they do not own, was illegal.