Banks large enough to threaten the stability of the financial system should be subject to higher capital requirements, the head of the U.K.'s financial regulator said in comments that offered a glimpse at the future of regulation in one of the world's biggest financial centers.
Adair Turner, the chairman of the Financial Services Authority, also warned large banks with operations overseas that regulators may require their local operations to be "separately and strongly capitalized" and hold their own reserves of cash for daily operations.
"Pursued to the limit, this would make global banks increasingly like holding groups of individual national banks, rather than single integrated businesses," he said in a speech to bankers in New York. Requiring bigger banks to set aside more capital may curb their growth, he said, as they become reluctant to grow to proportions that attract more restrictions.
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