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By Sudip Kar-Gupta and Huw Jones
PARIS Feb 23 A fresh look at the financial
market architecture in light of the current crisis is warranted
but a global approach was needed, Britain's top financial market
regulator said on Monday.
"There is clearly a strong case to be made for changes to
the rules," Hector Sants, chief executive of the Financial
Services Authority, told a conference on regulation.
Regulators from across the world are holding intense talks
on how to make a financial system that knows no border safer
amid the worst market crisis in over 80 years.
Reforming the rules without reforming wider issues such as
corporate governance would be to no avail, Sants said.
There was also a need to fairly and uniformly apply
financial rules, Sants said.
"They have to be global in nature and they have to be
flexible," he added.
Sants told Reuters that consumer confidence in Britain
towards the UK's banks, many of whom have posted huge losses due
to the crisis, was improving.
However, he said there were still areas where financial
regulation could improve.
There were a series of "shortcomings" in the Basel II rules
that banks apply to calculate how much capital to set aside to
cover risks, he added, echoing sharp criticism from his Dutch
counterpart at the same conference.
There was also a lack of clear understanding about "shadow
banking" and this area should be brought under general
supervisory oversight, Sants said.
The shadow banking system is made up of non-banking
institutions which act like banks using credit derivatives as
well as money funds, and special investment vehicles.
There was also a need to ensure proper coordination between
local and global supervisors of a financial institution.
Global leaders are aiming to set up colleges of supervisors
for all major cross-border financial institutions to involve all
relevant supervisors in a bid to share information and spot
"Fragmented supervision of individual firms does not allow a
clear understanding of the risks," Sants said.
Gaps also existed in macro prudential oversight in Europe
and around the world, he added, referring to spotting system
He also backed having a consistent global framework for
regulating the short selling of shares.
National regulators in Europe came under fire for their
piecemeal approach to introducing short-selling curbs in a
market where trading shares from different countries is
(Reporting by Sudip Kar-Gupta and Huw Jones; editing by Chris