Lord Turner tells banks to write their living wills
The Financial Services Authority (FSA) will today reaffirm its determination to ensure that each and every financial institution in the UK has a "living will" available in the event of its collapse. As we have seen with the likes of Royal Bank of Scotland and HBOS, when these companies hit a troubled patch it can take the regulator some time to confirm the situation, liabilities and potential liabilities for the future. As a result we will see the introduction of "living wills" over the next few months, but how will it help?
In the event of some kind of financial collapse or "financial turbulence" it is paramount that the regulator is allowed to act with greater speed and has information which is both accurate and helpful. Spending weeks or months ploughing through a company's report and accounts, balance sheet and liabilities will waste vital time which could cause significant issues with other financial institutions. The ability to literally go in there, address the situation and act will save much stress and potentially more problems for the future.
It will be interesting to see how these "living wills" look because they could in some circumstances highlight other issues which maybe investors and regulators were potentially unaware of.
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