UK regulator says world bank system still not fit

Banks need to have more capital strength to face crises ...

The world's banking system is still not strong enough to support the economy and avoid a recession, the head of Britain's financial regulator told Il Sole 24 Ore newspaper in an interview.

Adair Turner added that the two key issues now were bank capital strength and liquidity.

- The banking system sadly is still not in a position to give enough support to the real economy to avoid a recession - Turner said in the interview published on Thursday.

Turner, who is chairman of the Financial Services Authority (FSA), said the regulator was "ready to do whatever is needed to stabilise the markets."

He said regulators now had to work on a new structure to make the financial system stronger in the future and that UK finance minister Alastair Darling had asked him to report on the situation in March, 2009.

Turner said there were two key challenges ahead.

- The first is that of bank capitalisation. Banks need to have more capital strength to face crises ... to support trading ... and build up stocks of capital to make them more resilient in times of difficulty - Turner said.

- The other important aspect is liquidity - he added. - We are preparing a document on regulating liquidity in cooperation with the Basel Committee. -