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* Should tip off firms it sees facing problems
* FSB review also warns against "group think" at BoE
* Review says retaining top staff will be critical
By Huw Jones
LONDON, Sept 10 (Reuters) - Global regulators urged the Bankof England (BoE) to find ways to circumvent the secrecy of itsrating system on the financial health of banks and tip offlenders it thinks are getting into difficulties.
One of Britain's new financial supervisors, the PrudentialRegulation Authority (PRA) at the BoE, is drawing upconfidential rankings of all banks and insurers using aso-called "proactive intervention framework" or PIF rating.
A rating of 1 means there is a low risk to the viability ofan organisation while 5 means it is bust.
Most firms are expected to score 1 or 2 but the PRA will notpublish its findings as even a slight change could trigger a bigmarket reaction.
The watchdog will not even reveal the rating to the firm incase it feels obliged under EU rules to tell the market.
But the Financial Stability Board, which coordinates globalregulation for the Group of 20 leading economies (G20), said thesystem needed to be fine-tuned because awareness of its PIFnumber could help prompt a bank to take remedial action.
"The PRA should ensure that supervised firms are aware ofany heightened concerns and accompanying interventionactivities, and should explore options to disclose the PIFrating to such firms without triggering public disclosure,"according to the FSB, whose chairman is Bank of England GovernorMark Carney.
The FSB examined a slew of regulatory reform in the UKfollowing the 2007-2009 global financial crisis and how Britainhas implemented G20 pledges to make finance safer.
The review, which had no BoE official on its panel and wasled by Bank of Brazil Deputy Governor Luiz Pereira da Silva,said Britain should be commended for its reforms but warnedabout the risks of too much centralisation of new rules.
Britain was among the hardest hit by the crash because ofthe size and reach of its banking sector, parts of which had tobe bailed out by taxpayers.
It scrapped the decade-old Financial Services Authority,blamed for failing to spot the crisis, and replaced it in Aprilwith three new bodies which have been among the most hardlineregulators in the world.
In addition to the PRA, Britain also established a FinancialPolicy Committee (FPC) at the BoE to spot broad risks, and astandalone Financial Conduct Authority (FCA) to protectconsumers.
The FSB said centralising so much regulation at the BoErisked creating a "group think" mentality and that supervisioncould end up with a lower "status" than the high level policywork at the FPC.
"It will be important to ensure that the close and equalpartnership between the PRA and the rest of the BoE endures...It will also be important... to maintain the 'will to act'," thereview added.
It also said it was critical for regulators to retain seniorstaff, many of whom have moved to lucrative posts at banks andconsultancies, to make sure reforms were implemented in full.
Regulators should also ensure they had enough riskspecialists to cover the insurance sector and be flexible enoughto respond to problems at smaller financial firms, the reviewsaid.
