Largest banks in the world will be forced to simplify the legal structures and thereby increase their tax costs as a result of the global regulatory pressures to advance planning of bankruptcy, says Lord Turner, chairman of the Office for Supervision of Financial Services.
In an interview with Financial Times leader of the British financial regulator support the campaign aimed to force the scale and key system for banks to draw up plans for the gradual closure of the business in case of collapse. According to him, thereby regulate the structural complexity of these institutions.
„The introduction of so-called legacies will require clarification and simplification of legal structures – he says. – In the past, authorities worldwide have been tolerant to the proliferation of convoluted legal devices designed to maximize regulatory and tax arbitrage, „stated Turner. „Now we will probably have to require a clear on the issue,“ he continued, and acknowledges that the reforms will result in serious disputes.
The structures of the large banks will become less effective from a tax perspective, which could cost them hundreds of millions of dollars, experts warn. Later this month in Pittsburgh, the leaders of the G-20 will discuss the reform of the global regulatory architecture.
Stresnati by the collapse of Lehman Brothers one year ago, the statesmen in the United States and the European Union began to push for a regime to ensure gradual closing down of global financial institutions.
United States show the greatest interest to establish a regime that will clarify the rights of different classes of creditors, while the Europeans want to ensure a fair resolution of cross-border complaints.
„To create an environment in which it will be possible gradual closing of an institution such as Lehman Brothers, will probably have to charge a simplification of the legal bodies – said Lord Turner. – They must become more understandable to us. “
Lord Turner is in the Financial Stability Board, which sets the framework for the work of the Basel Committee on Banking Supervision. He defended the speed with which regulators reacted to the banking crisis and rejected criticisms of the British Prime Minister Gordon Brown, who in an interview with the Financial Times this week expressed his frustration to slowness of Basel.
„The world does not have a well-oiled mechanism for making decisions on international regulations,“ says Turner. And he continues: „Our task is to make the machine work on the best possible way.“ According to the Basel Committee will complete the planned changes to the rules of equity to one year.
Lord Turner stressed that the new provisions must be implemented by the end of 2010 and will raise capital requirements for certain hazardous trades.
Patrick Jenkins, London
Brooke Masters, New York