Mervyn King: Regulators need courage to tackle risks

Bank of England governor Mervyn King yesterday encouraged regulators to take a more proactive stance in combatting risks to the financial system, warning banks' own risk models were not strong enough.

King told the National Press Club in Washington global bank regulators can not rely on models that financial institutions use to identify if there is too much risk in the system.

At a meeting also attended by European Central Bank President Jean-Claude Trichet, and former US Federal Reserve chairman Paul Volcker, King said: "Conventional calculations of risks and how much capital banks need turn out to be irrelevant from one day to the next."

He said regulators must identify two or three major developments that are creating risks and "then have the courage to go in and tackle them".

King's comments follow a speech earlier this month by FSA chief executive Hector Sants, in which he detailed the expansion of the watchdog's remit to include the "culture and ethics" of the financial sector.