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Turner attacks banks’ complex assets

FSA chairman Lord Adair Turner has hit out at “complex” off-balance sheet instruments used by securitising banks.

At this afternoon’s Treasury Select Committee, Turner assured MPs that the proposed huge increases in capital requirements needed to deal with securities would regulate the market.

Turner said: “I think in the case of complex securitised credit, the banks were doing things where the possible benefits were pretty trivial and created huge risk.”

Turner says historically the FSA did not demand enough capital from securitising banks and will demand “several times” the capital needed now.

Turner also did not rule out the FSA ever deeming a structure or a product too complex.

He said: “They are so complex they have become very difficult to understand, that they have required these unobservable inputs to value, which is deeply unsatisfactory, it is unlikely that these things will exist in the future and I am not convinced that these instruments added to the sum total of human welfare and their disappearance we should not regret.”

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