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Santander Boss Calls For Global Supervision Of Banks

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Telegraph article - Botin

The global financial crisis can be divided into two periods: before and after the fall of Lehman Brothers. An institution with more than a century of history collapsed, sending shockwaves which brought down many other banks.

The deterioration of the financial system and the fall of Lehman produced one of the deepest and longest crises in financial history. There is no single cause behind this, though I believe that the crisis has its origins, in large part, in weak banking supervision in certain countries.

Those weaknesses prevented supervisory bodies anticipating or recognising the effects of excessive leverage, of the distribution of highly complex, little understood financial products, of the proliferation of interconnected risks and the dangers of off-balance sheet structures.

Such banking errors would have had minimal impact had there been a pro-active, effective, close-to-the-ground system of supervision, with continuous monitoring of banks' operations, that could adapt to the constant changes that characterise banking and ensure supervised institutions had open and understandable balance sheets and proper risk management.

This has been the experience in some financial systems, particularly Spain's, which has successfully passed the greatest stress-test in history. In Spain's case, partly because of previous financial crises, the relationship between the supervisor and lenders is very close. The Bank of Spain monitors continuously the performance and activity of Banco Santander, including on-site supervisory teams. This closeness has provided the Bank of Spain with a high degree of sensitivity and know-how.

Following the fall of Lehman, governments, central banks and international bodies stepped up their responses to the crisis . These responses were coordinated and convincing, and vanquished the spectre of another Great Depression. They took two forms: first, extraordinary measures designed to soften the recession and lay the groundwork for a recovery. Central banks and governments reduced interest rates, injected liquidity in exceptional quantities, and increased public spending or cut taxes. They also helped some financial institutions regain their solvency or facilitated mergers or acquisitions among those that were not viable. These measures are beginning to yield results and, for the first time since the start of the crisis, there's some room for optimism.

Second, authorities are working to create a new international financial framework to prevent future crises. The G20 summit last April in London set out the working guidelines, and now it is expected that the next summit in Pittsburgh will take things forward as planned.

It appears likely that measures will be introduced to eliminate regulations that accentuate booms and make recessions more difficult to manage. There are also plans to improve international alignment of relevant rules such as those on capital and those that reinforce the system's solvency and transparency. Other proposals involve improving banks' liquidity management (which so far has received little attention) and eliminating remuneration schemes that create incentives to take on excessive or ill-considered risk.

The measures address some of the shortcomings in the system that the crisis has brought to light. However, events have shown that banking regulation is useless if it is not accompanied by supervision that can understand and respond to changes and innovation in the sector.

International coordination and supervision of the system as a whole is moving forward. But, in addition, we need progress on global standards that ensure the quality of supervision locally, for every bank in every country. The crisis has underlined the importance of a solid and efficient financial system in a country's economy. The measures that have been proposed are crucial if we are to come out of this crisis stronger than we were before it.

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There is no single cause behind this, though I believe that the crisis has its origins, in large part, in weak banking supervision in certain countries.

I wonder which countries he means????

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I wonder which countries he means????

The irony that I was always taught not to trust banks in countries that can grow olives has not escaped me.

Seeing the boss of a bank in an olive growing country lecture the banks and regulators in so called sophisticated markets in cooler climes is amusing.

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I wonder which countries he means????

The UK and Spain - which has helped Santander gobble up lots of its competition. It is a bit like the Goldman Sachs of the retail banking sector - not bad for a small Basque town with a ferry service to Plymouth. :lol:

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The UK and Spain - which has helped Santander gobble up lots of its competition. It is a bit like the Goldman Sachs of the retail banking sector - not bad for a small Basque town with a ferry service to Plymouth. :lol:

I think Santander is actually in Cantabria

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