Carney cautious on failing banks Regulators around the world are still some way from solving the problem of how to deal with the failure of a giant global bank despite making progress on the issue, Mark Carney, the head of the Financial Stability Board, has said. Mr Carney, who is due to succeed Sir Mervyn King as governor of the Bank of England in July, acknowledged that while countries had taken steps towards agreeing cross-border resolution strategies, "further progress is needed." The biggest banks are supposed to be drawing up "living wills," essentially guides to help authorities in a crisis, but a number of countries have missed the end-of-2012 deadline. The FSB will try to expedite the process, he said, by working to tease out the main legal obstacles to winding up banks across national borders. Regulators will also review each bank's resolution plan as it is completed, while the FSB is also drawing up guidelines for managing the failure of non-banks, such as the broker MF Global. Mr Carney said he was "surprised" by reports in the Financial Times that US banking supervisors have told banks there not to assume that regulators will work together to avoid the catastrophic failure of a financial group. Instead, the Federal Deposit Insurance Corporation and the Federal Reserve have insisted that "living wills" should spell out what sorts of legal filings, notices and applications a bank would need to submit in each jurisdiction to ensure cross-border co-operation. He said US authorities were considering the legal implications of a pure insolvency that ended up in the bankruptcy courts - as in the case of Lehman Brothers - but that regulators were also pursuing co-operative agreements that would allow them to stabilise or break up a failing bank without resorting to insolvency. "Authorities in major jurisdictions have made progress but have to continue to work to perfect cross-border resolution strategies to end "too big to fail" but also for the efficiency of the overall system," he added. The FSB continues to work on reducing the risks posed by the $67tn shadow banking sector, which includes a slew of non-banks that act like banks by extending credit or offering instant access accounts. The package unveiled in November includes new rules on asset securitisation, tougher standards for money market funds, "repo" lending and securities lending, as well as a guide for regulators looking to spot potentially dangerous forms of shadow banking. Mr Carney said the FSB expected to release a report on the reactions to the proposal later this week. Mr Carney said the FSB would also play a role in responding to the Libor rate-rigging scandal. Revelations that bank traders at several banks sought to move the London Interbank Offered Rates to make money on derivatives have called into question similar rates around the world, as well as other benchmarks that are set by polling market participants. The FSB is currently "gathering information ... In coming months we will sharpen our views on best practice," he said. The FSB and Mr Carney also echoed a warning first sounded earlier this month by Sir Mervyn that investors may be taking risky bets in order to boost returns. "Market participants and authorities need to be on guard against mispricing of risk in pricing of assets," he said