For immediate release: Wednesday 16 December 2009
IMA WELCOMES PROPOSALS TO DEAL WITH INVESTMENT BANK FAILURES
Speaking today at the launch of the Treasury's proposals to strengthen the UK's ability to deal with any future failure of an investment bank, Richard Saunders, Chief Executive at the Investment Management Association, said
"The financial crisis of the last two and a half years has been in large measure one of moral hazard. When banks fail they should be able to go under without endangering the whole system and forcing taxpayers to bail them out.
The Treasury's proposals for the future handling of investment bank failures are a critical step in dealing with the issue. They follow the reforms in the Banking Act 2009, which have transformed the resolution arrangements for retail banks. The second necessary stage in the process is to transform the resolution procedures in the capital markets. Taken with the proposals in the Financial Services Bill for "living wills' and prospective reforms to capital requirements by the G20, there is a real prospect of a more stable system in the future.
The proposals are also important for the UK as a financial centre. Investors, whether domestic or international, want well-regulated markets in which they can invest their money with confidence. The Lehman collapse exposed a number of problems with the way in which UK law and regulation interacted with market arrangements, as well as with some market practices. Getting this right going forward will be good for financial stability, good for investors and good the UK as a financial centre."
The investment management industry has a strong interest in a stable environment for investors in the UK. The proposals in the Treasury Green Paper are welcome and now need to be taken forward."
Notes to editors:
1. The report, 'Establishing resolution arrangements for investment banks', is the Governments second consultation paper, and sets out detailed proposals for effective resolution of a failed investment firm. It can be viewed here: http://www.hm-treasury.gov.uk/consult_investment_banks2.htm
2. About the Investment Management Association
The IMA is the trade body for the UK's £3 trillion asset management industry. The money its members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs. Its role is to represent the industry and promote high standards.
For further information, please contact:
Noreen Shah, Press Officer, IMA, 020 7831 0898
Ginny Broad, Head of Communications, IMA, 020 7831 0898 or 07834 089332