THE SHADOW banking sector could face a raft of new red tape, with a senior Bank of England official outlining 10 fresh regulatory proposals at a speech in Brussels this morning.
Paul Tucker will recommend widening capital requirements and applying “bank-type regulation” to the shadow industry, which includes money market funds, securitisation and securities lending.
The deputy governor for financial stability sits on the new Financial Policy Committee, a body set up to grant the Bank exceptional new regulatory powers over the City.
He will call for banks to include shadow banking arms on their balance sheets – although this would need changes to accounting rules – and to “hold more liquid assets against such exposures”.
And shadow banks financed materially by short-term debt “should be subject to bank-type regulation and supervision of the resilience of their balance sheets,” he will say.
His speech today follows the publication of a consultative paper by the EU Commission on shadow banking, with authorities in many countries pushing for stronger regulation.