Mark Carney says bank chiefs should put up with new jail threat law

Mark Carney welcomed banks’ promise to delay ending derivatives contracts when a bank fails
Bank of England governor Mark Carney yesterday brushed off the concerns of bankers who are quitting the industry over plans that could see senior executives sent to jail.

“If you are the chairman or the head of the risk committee, you have a responsibility for the activities of that institution,” said Carney, speaking in the US.

“If you don’t think you can do it, you shouldn’t be on the board. It does focus the mind of directors and it should. I would like to think that the minds of directors are being focused. Some of them might not like it. That’s OK.”

Meanwhile Carney welcomed an agreement by 18 global banks pledging not to cancel cross-border derivatives contracts in the event of a major lender collapsing, but instead to give regulators time to step in and begin to clean up the broken institution.

In the crisis, banks failed and triggered clauses allowing other lenders to terminate the contracts, making a bad situation worse and rendering it more difficult to work out how to resolve the broken banks.

“By agreeing to a short stay, cross border resolution becomes much more realistic and achievable,” Carney said last night, describing the current round of talks as a “watershed in ending too big to fail” in the banking sector.

The Federal Reserve also welcomed the agreement.

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