Interesting in itself and very revealing about the real venue of (and participants in) global conference. M -----Original Message----- From: [email protected] [mailto:[email protected]] On Behalf Of Sid Shniad Sent: Thursday, February 04, 2010 6:56 AM Subject: Bankers try to fight off wave of controls
http://www.ft.com/cms/s/0/be5b72a4-0e85-11df-bd79-00144feabdc0.html?ftcamp=L ate_headline1/NL/USFeb2010/Vanilla_dvos10/0/ The Financial Times January 31 2010 Bankers try to fight off wave of controls By Patrick Jenkins and Gillian Tett Protesters were handing out leaflets in the streets of Davos at the weekend. But their anger was not directed against world poverty, nuclear power or war; instead they were demanding that banks should put their derivatives business on to exchanges to make the financial system more transparent. It is a potent reminder of how issues about financial stability dominated the agenda at the World Economic Forum last week. For most of the past decade, banks have used the WEF in Davos as a lavish opportunity to entertain clients. Last week they were fighting to fend off a wave of controls on sectors ranging from bonuses to proprietary trading and derivatives. International supervisors, led by the Financial Stability Board and the Basel Committee on Banking Supervision, are pondering how and when they should change the levels of capital and liquidity that banks will have to hold in future. Moreover, in recent weeks, politicians Barack Obama, the US president, Alistair Darling, the UK chancellor, and Nicolas Sarkozy, the French president have weighed in with measures, short-circuiting the more consultative regulatory response. Whether the banks could claim victory for their lobbying at Davos remains unclear, partly because the financial industry is fighting on many fronts. One issue that dominated discussion at the WEF wasproprietary trading and a putative move by the Obama administration to ban the activity at banks that take insured deposits. Most bankers vociferously opposed the idea. Frédéric Oudéa, chairman and chief executive of Société Générale, said: There is a process already under way in Basel. We need it to remain an orderly process in which regulators take the lead role and organise the dialogue with the banking industry. Otherwise there will be confusion, uncertainty and additional pressure on the financial system. There is widespread confusion about what any ban might mean. Barney Frank, chairman of the House of Representatives finance services committee in Washington, told the Financial Times last week that banning banks from proprietary trading could be covered by a bill his committee had prepared that would permit a systemic regulator to clamp down on it. Some Western regulators said a ban might be incorporated into moves being considered by the Financial Stability Board to tighten the treatment of banks trading books. But policymakers in Davos warnedthat banks would be foolish to think they would be let off the hook, as one said. There is real political pressure to do something, one senior western regulator said. The banks need to recognise that. That, in turn, meant a subtle but important shift in attitude among the bankers developed last week. Until a few weeks ago, most bankers had expected to use the Davos meeting to swap views on the shortcomings of the Basel committee proposals, put forward by financial bureaucrats in a consultation document late last year. In the event, there was plenty of handwringing over how the new Basel rules on capital would make it unfairly expensive to control a stake in a subsidiary, rather than wholly own it; and how plans to limit the value of deferred tax assets could strangle economic recovery. But the most powerful consensus was that however awkward regulators were, unpredictable politicians were worse. Bob Diamond of Barclays Capital talked about the very negative impact US measures to constrain banks would have; Josef Ackermann of Deutsche Bank spoke of the costs of cacophony associated with unco-ordinated proposals; Sadeq Sayeed, chief executive of Nomura in Europe, the Middle East and Africa, said: A lot of the policy and tax proposals that are coming out are half-baked. While the international bureaucrats were keen to distance themselves from the bankers, they stressed that reform had to be co-ordinated rather than driven by domestic politics. We cannot have reform of the system driven by what each country sees that it needs for itself, Dominique Strauss-Kahn, head of the International Monetary Fund, told the Davos forum on Saturday. We need to have co-ordination we cannot afford to have different solutions in different parts of the world. !DSPAM:2676,4b69ff2c177553797547867!
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