BoE's Shafik urges co-operation between nations on financial regulation

The Bank of England’s Minouche Shafik has called on greater co-operation between countries on financial stress tests and capital rules for the largest companies.

Speaking at event in Hong Kong hosted by the BoE, the International Monetary Fund and the Hong Kong Monetary Authority, Shafik said nations should cut down global barriers on financial regulation and work together to avoid another financial crisis.

Shafik, who oversees financial markets at the Bank, said: “The body of evidence required to justify including the interests of other nations in the setting of domestic policy is understandably large, even when the long-run benefits would be to all.

“This is more true now than ever, as the unequal distribution of benefits from globalisation has increased scepticism about international co-operation.”

While international banking rules, known as Basel III, require some mutuality between regulators in applying curbs on bank lending, Shafik suggested covering a wider range of tools.

Research carried out by the BoE showed that acting in “enlightened self-interest” in conjunction with other nations “can further reduce the likelihood of a crisis by more than if countries act alone”, Shafik said.

Shafik is leaving the Bank in February after two years to join the London School of Economics.