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Jan 22 (Reuters) - The financial system is safer than it wasfive years ago as banks have more capacity to withstand shocks,but more needs to be done to reduce risk, particularly inderivatives.
A poll of bankers, lawmakers, regulators and othersattending the World Economic Forum in Davos, Switzerland showed61.7 percent believed the financial system was safer than fiveyears ago, while 38.3 percent said it had not improved.
"Markets are safer, and quite markedly so," Douglas Flint,chairman of Europe's biggest bank HSBC, said during adebate that preceded the poll of those attending the session.
"It would be a shocking indictment of the industry,regulators and public policymakers if six years after a dramaticcrisis efforts hadn't been successful to make the system safer,"Flint said.
Others disagreed, however.
"I don't believe the financial system and markets are saferand I don't believe they are safe," Paul Singer, founder and CEOof New York-based hedge fund Elliott Management, said.
"The leverage in the system, especially in derivatives, hasnot been meaningfully reduced, and the opacity of derivativesand other complicated securities has not been changed at all."
Complex derivatives have been blamed for playing a big partin the financial crisis and regulators have tried to improvetransparency in these products.
Singer said countries that were the last line of support in2008 now had less capacity to help the industry, while manyfinancial firms still did not understand their risks.
But Flint and Antony Jenkins, chief executive of Barclays, said increased capital and liquidity gave banks fargreater capacity to withstand shocks, recovery and bail-in plansshould limit damage to a bank in trouble, regulatory andsupervisory resources had swelled and the structure of pay hadimproved to discourage risk-taking.
Management were spending a majority of their time on theseissues, and HSBC's board spent between two-thirds andthree-quarters of its time on regulation, oversight and dealingwith legacy issues, Flint said.
"It's very difficult to argue that the financial system isnot safer than it was in 2008, but the question is how muchsafer is it," Barclays' Jenkins said.
"We still have a significant amount of work to conclude theimplementation of all of the regulatory changes, and this willnot happen until close to the end of this decade," he said.
