Leading bankers and industry groups warned yesterday against isolated initiatives by the United States and Britain to regulate banks, saying one set of rules were needed to govern the global banking industry.
The Group of 20 leading nations have attempted to solve the financial crisis through a common global approach, but policymakers and regulators welcomed plans by US President Barack Obama to avert curb banks’ proprietary trading risks.
Barclays Capital’s boss Bob Diamond said Britain’s move to tax bankers’ bonuses could threaten supranational solutions as these nations shift their focus on domestic policy and elections.
“This is a time when isolated actions in the United States and the UK are not beneficial,” Diamond said as discussions on the future shape of the financial system kicked off at the annual World Economic Forum.
“[There is the] opportunity to work constructively through the G20,” he added.
Deutsche Bank CEO Joseph Ackerman said some activities could move to the unregulated sector and so undermine efforts to make markets more resilient.
“We are in a global financial market and we need a level playing field. It would not be productive to have different regulatory frameworks,” he said.
Jaime Caruana, the head of the Bank for International Settlement that is trying to push through new global financial standards, also acknowledged the need of greater international co-operation in shaping up new rules for banks.
However, he also said that individual countries were free to use a certain degree of flexibility and said that he was “not convinced” that countries with tougher financial rules would be at a disadvantage.
Bundesbank President Axel Weber gave cautious support to the Obama proposal, telling CNBC at Davos: “It goes in the right direction. We need to limit activity. We need to have more capital held against riskier activities.”
Weber added the US approach would not get wholesale backing in Europe.
Charles Dallara, head of the Institute for International Finance, a lobby group for big global banks, said Obama’s proposal merited debate but may not achieve its goal, especially if the US took a unilateral approach to regulation.
“While we respect the right of any government to propose whatever measures it may deem needed in its market, it’s not going to be effective at all to have one set of rules in the US and one in Europe and one in the UK and one in Japan and one in Canada,” he said.
Obama’s plan to take on the big banks, which sent financial markets tumbling when they were unveiled last week, is seen as an attempt to exploit widespread public anger over the excesses of investment banking to win back support among the US middle class.
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