Time arrives for reforming financial regulation system: HSBC chairman

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It is the right time for the authorities to start to think about the best ways of strengthening the financial markets when the global economy has stabilized, said Stephen Green, chairman of HSBC, the largest bank in Europe.

Green made the comments in an exclusive interview with Xinhua on the sidelines of the annual meeting of the World Economic Forum in the Swiss skiing resort of Davos.

Time to strengthen financial regulation

Green said that the reform of the global financial regulation system should be based on international co-ordination because the capital markets are increasingly global.

"It is very difficult to achieve an effective reform if you just do it in one country, " he said. "Lots of collaborations are required to get this right."

Stephen Green, gestures while speaking during a panel discussion entitled 'Business Leadership for the 21st Century', at the WEF in Davos, Switzerland, Jan. 29, 2010. [CFP]

Stephen Green, gestures while speaking during a panel discussion entitled "Business Leadership for the 21st Century", at the WEF in Davos, Switzerland, Jan. 29, 2010. [CFP]

Meanwhile, Green said that banks' important role will not be changed even the global financial crisis took place. "Banks are central for economic growth. You can't have economic and social development without having a financial system which is robust, stable and able to provide credit services to businesses and people in the real economy."

"We have to learn the lessons from the crisis to make sure the system is strengthened, so it is able to continue to perform its central role."

From his standpoint of view, the market can not police itself and it needs a regulatory framework. "The governments need to make sure the right regulation in place for the financial development," said Green.

"There's a real responsibility on the leadership of banks to recognize that they have economic and social responsibility and to ensure their business is conducted professionally."

Banks in general should have more capital and liquidity than they used to, while they should have less leverage, Green said.

He believed that by the end of this year, the authorities internationally will have established some new benchmarks for the banking industry.

With regard of U.S. President Barack Obama's proposal for limiting banks' size, Green said it is actually very difficult to define what is appropriate trading. In his opinion, the better approach is to use the regulations to make sure banks have lots of capital to hold against their trading positions.

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