Regulators should have greater levels of control over the growing global shadow banking industry.
That is the opinion of Bank of England deputy governor Paul Tucker, who believes powers should be granted to supervisors that would enable them to help curb this expansion through demanding more collateral on transactions.
During a speech delivered at the European High Level Conference in Brussels today (27 April), Mr Tucker noted that the trend of shadow banking needs to be brought under control sooner rather than later.
"The authorities should be able to step in and set minimum haircut or margin levels for the collateralised financing markets, or segments of them," he stated.
Mr Tucker - who assumed his current role in March 2009 - went on to say that such a process would require international co-operation between regulatory bodies.
Under the official's proposals, non-banking financial companies would also face "bank-type regulation and supervision" with regard to their balance sheets.
By Gary Cooper