The Bank of England has published a speech given by Martin Taylor, External Member of the Financial Policy Committee. The speech is entitled Why we need a leverage ratio, and how bank boards might take charge.
In the first part of his speech Mr Taylor briefly considers the leverage ratio and discusses the following questions:
- why have a leverage ratio at all, when we have a risk-weighted capital ratio already?
- what determines the calibration proposed by the Basel Committee?
- why are the Financial Policy Committee’s proposals not simpler?
- what kinds of capital is it appropriate to allow into the numerator of the ratio?
In the second part of his speech Mr Taylor discusses how boards can be more effective. He states that one of the solutions, board committees, has itself turned into a problem. He acknowledges that committees make the board more efficient in the sense that they allow it to take on a greater workload. However, he also argues that they have reduced board cohesion and for the ability of the board to see any sort of big picture. He states that the committees “need to be the obedient servants of the board, not its masters.”
View Why we need a leverage ratio, and how bank boards might take charge, 20 November 2014