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Turner Tells Banks To Plan Ahead For Their Own Demise

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The world’s biggest banks should be made to draw up plans that can be put into practice if they fail, the chairman of the Financial Services Authority (FSA) said yesterday.

Lord Turner backed international moves to make large banks — those that are integral to the global banking system — set out “living wills†in case they collapse.

He said that the process of working out how they would be wound down should help to unravel complicated structures used to keep tax bills to a minimum.

The pressure on big banks to plan for their demise follows the collapse of Lehman Brothers almost a year ago, and taxpayer-funded bailouts of institutions around the world, including Royal Bank of Scotland and Lloyds Banking Group in the UK.

The fallout from the failure of Lehman continues, and the bank has still not been fully wound up by administrators almost a year after it collapsed.

Policymakers in the EU and the US are anxious to make sure that a new regulatory regime would make future bank collapses easier to deal with.

Lord Turner said: “Living wills will be a forcing device for the clarification and simplification of legal structures. In the past, authorities around the world have tended to be tolerant of the proliferation of complex legal structures designed to maximise regulatory and tax arbitrage. Now we may have to demand clarity of legal structure.â€

He admitted that any reforms were likely to be contested by banks.

The “living wills†concept is likely to be discussed at the G20 meeting in Pittsburgh this month.

Lord Turner also defended the length of time it took for regulators to respond to the global banking crisis. Gordon Brown criticised the speed of the Financial Stability Board’s progress this week.

I can see the banks organising this well, perhaps they could create some sort of derivative contract covering this event?

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course they are planning, Salaries UP, parachutes gold plated, bonuses doubled, pensions secured.

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