Bank capital cushions more important than role split - BIS

FRANKFURT Mon Feb 4, 2013 9:42am GMT

FRANKFURT (Reuters) - Separating banks' riskier trading activity from their retail business would make the banking system more complex and is less important that building bigger capital buffers to prevent future crises, a top central banking official was quoted saying.

"From my point of view, higher capital and liquidity requirements are more important for stabilising banks than the separation of proprietary trading and deposit-taking business," Jaime Caruana, general manager of the Bank for International Settlements, was quoted saying in Handelsblatt newspaper.

However, it was up to finance ministers if they want to make changes to the universal banking model, whereby retail and investment banking are under the same roof, he told the paper.

France and Germany are planning a reform of the banking system that will leave big lenders largely intact, despite a welter of rules aimed at making sure taxpayers are not forced to bail them out in the next crisis.

Meanwhile Chancellor George Osborne is set to say later on Monday that banks which fail to guard their day-to-day banking from risky investment activities will face being dismantled.

The BIS has led efforts by international banking supervisors to force banks to bolster their loss-absorbing capital to help prevent the spread of financial crises.

Caruana said in the interview published on Monday it was too early to give the all-clear on the euro zone crisis, despite a period of relative calm in the markets following intervention by the European Central Bank.

"It is still possible that the euro crisis can break out again and worsen," he said, adding that politicians must make use of the calm brought by the ECB to push through reforms on a European and national level.

(Reporting by Jonathan Gould; Editing by David Holmes)

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