By Sheila Mullan
NEW YORK (MNI) – Bank of England Deputy Gov. Paul Tucker Thursday
night, answering questions after a speech, said that one of the
“operational” mistakes in the financial crisis was that certain
short-term financed entities were not required to have enough
insurance.
That situation of “leverage” of short-term entities having credit
lines from banks made the credit crunch worse.
“One of the great mistakes was that zero capital was required
against 364-day credit instruments,” Tucker said, when asked the
circumstances of the crisis.
Tucker answered questions at the 20th Annual Hyman Minsky
conference presented by the Levy Economic Institute of Bard College.
Such a short-term credit vehicle can’t be issued “unless it gets
insurance from a bank,” he said.
But Tucker said this shows a situation where regulators “need
to know about the macro and the micro.”
Tucker warned that “complacency” must be avoided by regulators so
that they don’t miss any dangerous preconditions of a crisis.
Tucker carries the financial stability portfolio at the BoE and his
remarks were confined to regulatory topics although he is also a
member of the Monetary Policy Committee.
As reported earlier, in his speech, Tucker called for more global
cooperation among regulators.
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