AN IDEA BEATEN BY REALITY
Others, like the Bank of Italy's director general, Lamberto Dini, have not yet come to terms with deregulation. Speaking at a conference in Geneva in May, Dini said: "In countries with a highly integrated financial services industry, considerable interest has emerged in functional (as opposed to institutional) supervision, under which a given activity is subject to the same controls, regardless of the financial institution involved. An alternative approach would be to maintain the separation between markets and intermediaries providing different services. The need for transparency and effectiveness in banking supervision tends to favour the latter approach, especially when the services provided are quite distinct."
The response of bank regulators displays the sharp differences in approach between the national markets. In an era of competitive deregulation, consistency of treatment cannot be taken for granted. In introducing his consultative paper on risk weighting for NIFs and RUFs, Robin Leigh-Pemberton, governor of the Bank of England, assured British bankers in his covering letter that the Bank was doing all it could to ensure consistent treatment by the various national supervisory authorities. This hasn't, however, prevented the Japanese from proposing a lower risk weighting, or German banks from seeking one even lower than the Japanese.