–Adds Detail To Version Transmitted At 1000 GMT

LONDON (MNI) – The Basel III Accord was a step in the right
direction but not rigorous enough and there is still a lot of work to be
done to bolster bank regulation, Bank of England Deputy Governor for
Financial Stability Paul Tucker said in remarks published Monday.

Tucker’s remarks, made at previous seminars, showed him believing
Basel III is just one step along the road to ensure the banking system
is robust enough to withstand financial storms.

On the Basel III Accord Tucker said “the Bank of England, would
have liked it to be more rigorous in some respects, but we most
certainly think that it is an Accord worth having.”

It has not corrected all the problems raised by Basel II.

“Finding remedies for some of the problems with Basel II remains
work in progress,” Tucker said.

He said the Basel Committee on Banking Supervision’s review of
capital requirements for trading book positions “will be one of the most
important endeavours of 2011.”

The trading book capital requirements review must tackle “The venal
regulatory arbitrage that existed between the banking book and the
trading book,” he said.

Also it must ensure capital is “held against the risks of violent
swings in liquidity premia for instruments that are not resiliently
liquid”

Tucker described the Liquidity Accord from Basel as a big step but
“a quarter of a century late”.

He said the regulatory regimes’ failure to “keep up with the
extraordinary evolution of our capital markets over the past two decades
or more,” was a significant factor in the financial crisis.

The BOE Deputy Governor lambasted regulators for missed
opportunities.

He said it was a “crying shame” the debate about putting more
activity through central counterparties did not happen a decade ago.

Tucker also said the prevailing wisdom before the financial crisis
that it was wrong for regulators to lean against the credit cycle was
“dangerous nonsense.”

“The zeitgeist embraced the seductive idea that either there wasn’t
a bubble or if there was a bubble that there was nothing you could do
about it. Which was dangerous nonsense, as events have proved,” he said.

Tucker’s remarks were made at the Institute of International
Bankers Annual Breakfast Regulatory Dialogue Washington back in early
October and at a Eurofi Financial Forum in Brussels on September 30 but
only published Monday.

–London newsroom 0044 20 7862 7491; email: drobinson@marketnews.com

[TOPICS: M$B$$$,M$$BE$,MT$$$$]