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The Hot Seat: Sebastian Fairhurst

Monday 29 March 2010 - by Nicola York


What would you like to see happen to tackle these issues?
“There should be a strong coordination among political leaders and of those in fact who are in charge of getting it done; the supervisors, central banks, finance ministers, the European institutions and so on. Those are the ones who are in fact in charge of implementing this. They should make sure that those political commitments are done in a consistent way across the G20 countries and also in Europe. Europe is not represented across the board in the G20 so that is an important message. If you start creating different legal frameworks again, then you might put down the seeds for the next crisis.”

Does the size of banks matter?
“We do not say that institutions are too big. If you look at Northern Rock, it was a small institution. So it is not the size which is the only factor; you have the interconnectedness and the business models. Size might play a role in certain areas and activities, but the size of the financial institution is giving you benefits because you have diversification.”

What would be the effect of higher capital requirements on banks?
“There should be an overall picture and assessment of what might happen to the economic scenario if you change capital requirements. We have to face the situation that we are still in economic crisis and you need financial institutions to revitalise the economy. You cannot just say that banks in particular have behaved badly and now we need to punish them. That is not the solution because banks have a function. If you put the burden too high, if you say capital requirement ratios have to go up quite a lot, then they will be less able to lend and help the economy recover.”



Is enough being done by the European Union to come to a solution?
“I think the proposed new European system of financial supervision, the macro picture and the micro picture, will definitely improve, but it will not be enough. You need resolution regimes, you have to look at crisis management, burden sharing, those are the important things. And we don’t see member states now coming together at European level. It is more a country movement which means refragmentation is a risk.
“You don’t really see a viable solution, you don’t see Governments saying, well let’s face that we have a single market and let’s have a European solution.”


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