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Chairman's foreward (partial) "In April 2009, the FSA published The Turner Review and an associated Discussion Paper, which set out proposals for regulatory reform at UK and global level to respond to the financial crisis and build a sounder financial system for the future. Many of those recommendations were closely in line with those of other major reports, such as those by Jacques de Larosière and the G30. Many have now been adopted by the international Financial Stability Board, and the Basel Committee on Banking Supervision is now engaged in an intense programme of work to design the details of new capital and liquidity regimes. Responses to The Turner Review and Discussion Paper, meanwhile – on which we reported in a Feedback Statement published in September – raised some important issues relating to detailed implementation, but in general supported the broad thrust of the agenda proposed in the Review and now being pursued. There are, however, two related issues where there is not yet a clear consensus, where debates since April have suggested new approaches not covered in detail in The Turner Review, and where the FSA’s own thinking has continued to evolve. These are: (1) how to offset the moral hazard created by the existence of large systemically important banks which can be either ‘too-big-to-fail’, ‘too-inter-connected-to fail’, or ‘too-big-to-rescue’? It is agreed these problems must be solved: but should the policies to achieve this be smaller banks, capital surcharges, more standalone subsidiaries, the separation of narrow from investment banking, or ‘living wills’? and (2) how should the cumulative impact of the various capital and liquidity regime changes be assessed, and what can we say about optimal levels of capital and liquidity in the global banking system? It is agreed that the global banking system needs more capital and more liquidity than in the recent past: but how much more? This Discussion Paper focuses on these two issues. It describes current FSA beliefs and approaches where these are defined, but also sets out the full range of possible approaches which could be considered."

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