UPDATE 1-Bank regulation issues seen settled in 6 months -UK finance minister

(Adds details that BNP Paribas boss not attending)

By Steve Slater

LONDON, June 4 (Reuters) - Britain's finance minister GeorgeOsborne voiced confidence on Tuesday that politicians andregulators from major economies will achieve a framework forsorting out problems with bank regulation within six months.

The Financial Stability Board, the regulatory arm of theGroup of 20 leading economies (G20) that is chaired by Bank ofEngland Governor Mark Carney, is targeting a G20 meeting on Nov.15-16 in Brisbane, Australia, for resolving questions such ashow to handle big, multinational banks if they hit trouble.

"We need to have an end to the process to bring somecertainty to the issues, and Mark (Carney) has set the BrisbaneG20 summit as the point where we can get the global politicalagreement achieved, and I am confident that timetable ispossible," Osborne said at a bank industry conference.

Regulators are putting in place a complex jigsaw of rulesand mechanisms to wind down failed banks without the drasticfallout seen when Lehman Brothers went under in 2008. Osbornesaid finance ministers and the FSB need to "make that allcoherent and work for global institutions."

The aim is to shield taxpayers, who had to shore up lendersin the 2007-09 financial crisis, from the cost of ensuring thata bank's essential services, such as its payments system, cankeep functioning.

Regulators see solving the "too big to fail" problem as keyto restoring trust that globally coordinated rules can workrather than each country going it alone.

Key questions are what sort of creditors should be 'bailedin' to help recapitalise a bank in trouble, whether thatloss-absorbing capital should be held by parent banks or held bysubsidiaries in each country, and amending derivatives contractsto give regulators time to wind down a bank that has failed.

Osborne was speaking at the start of a 3-day meeting inLondon of the Institute of International Finance (IIF), thetrade group for banks, insurers and other financial firms.

"I do understand that people in finance and banking have hadto put up with a lot of regulatory change in the last few years,but that's not surprising when you have a banking crisis andtaxpayers are forced to put a huge amount of money into banks,"Osborne said.

Banks also remain under scrutiny for misconduct issues andpenalties for past misdeeds are on the rise, and France's BNPParibas could be fined $10 billion or more forallegedly evading U.S. sanctions relating to Iran.

BNP's Chairman Baudouin Prot was due to speak at the IIFevent but he pulled out, which the bank said was due to a changein his agenda.

"REGULATORY BACKLASH"

Davide Serra, founder and CEO of Algebris Investments, which specialises in the financial sector, criticised the scale ofregulatory change that has been unleashed since the crisis and alack of coordination between European and U.S. regulators.

"Because of the weakness of some business models ... weended up having a massive regulatory backlash," Serra said.

Last week International Monetary Fund chief ChristineLagarde said bank industry reform had been slowed and hamperedby fierce industry lobbying, but a senior regulator said onWednesday rules will never be perfect and regulators need to "behumble" about shortcomings.

"In a highly dynamic world, imperfect knowledge leavesregulatory design permanently in catch-up mode," said JaimeCaruana, general manager of the Bank for InternationalSettlements.

"As soon as a rule, simple or complex, becomes a bindingfinancial regulation, it will cause changes in financialinstitutions' risk management that will make it less binding andless effective," he said, referring to this as a "regulatoryuncertainty principle". (Reporting by Steve Slater; Editing by Ruth Pitchford and DavidEvans)