National bank regulators risk undermining a fragile economic recovery if they pursue a new round of capital and liquidity rules beyond those agreed internationally, bankers said at gathering in Washington.
Central bankers told executives at weekend meetings in Washington to expect more financial rules, especially for the largest firms, after international regulators set minimum standards in Basel last month. If countries surpass that accord, they will deny banks a level playing field and impede growth, chief executive officers including Deutsche Bank AG’s Josef Ackermann and Standard Chartered Plc’s Peter Sands warned at the event, hosted by the Institute of International Finance.
“There are growing signs that global coordination is fizzling and unilateral actions are pending,” said Ackermann, chairman of the IIF, which represents more than 400 financial institutions. “Global banks will have to comply with the higher rules in every jurisdiction, regardless of their home base. That will steal from credit to companies and hurt job creation.”
Lobbying groups are shifting attention to national regulators after the industry persuaded some international rule makers that proposed rules may stunt economic growth. The Basel Committee on Banking Supervision softened planned capital and liquidity requirements last month, then gave lenders about a decade to comply. Countries such as Switzerland and the U.K., which had pushed for tougher rules, are moving ahead with additional restrictions to rein in their banks.
UBS, Credit Suisse
“It’s possible that financial centers may start competing for prudential rigor,’ Charles Freeland, former deputy secretary general of the Basel Committee on Banking Supervision, said in a telephone interview today. “Most banks want to be based in a financial center that is perceived to be well regulated.”
Switzerland last week proposed the first capital surcharge on too-big-to-fail banks. A government-appointed panel said UBS AG and Credit Suisse Group AG need to hold almost double the capital required under Basel III rules. The plans still have to be endorsed by the government and approved by Parliament.
Central bankers that addressed the IIF members during the group’s annual gathering said some rules may surpass Basel III, as the new version of the global capital standards are named. Philipp Hildebrand, president of the Swiss National Bank, Mark Carney, Bank of Canada’s governor, and William Dudley, head of the Federal Reserve Bank of New York, said Basel only set a minimum and more should be expected. Bank of England’s deputy governor Paul Tucker echoed that phrase when addressing reporters at another venue yesterday.
‘Too Much Divergence’
Those central bankers were the same ones pushing for tougher rules and faster implementation within the Basel committee, which is made up bank regulators and central banks from 27 countries, as it formulated its new rules. They were countered by France, Germany and Japan, whose politicians were concerned about the economic impacts of the restrictions, amid warnings from Ackermann, 62, and other bankers. Frankfurt-based Deutsche Bank is Germany’s biggest lender.
In June, the IIF published a report predicting that bank regulations would shave off 3.1 percentage points from economic growth in the developed world. Though the Basel committee’s original proposals were softened, the IIF isn’t reducing that estimate, the industry group said yesterday. That’s because benefits of Basel compromises may be offset if national policy makers enact additional measures and international regulators impose surcharges for the largest banks, the IIF said.
‘Too Much Divergence’
“We never expected 100 percent uniform implementation of Basel rules worldwide, but we’re worried about too much divergence,” said Sands, 48, an IIF board member. London-based Standard Chartered gets more than three quarters of its earnings from Asia.
A study done by the Basel committee and the International Monetary Fund found the impact on those nations’ economies to be about one eighth of the IIF estimate.
Bankers from around the world also expressed concern at the IIF meeting that some national regulators, along with investors in bank stocks, will force a faster adoption of the rules than Basel’s timetable requires. Central bankers sought to ease those concerns. Bank of Canada’s Carney said the timetable won’t be accelerated if banks need breathing space. The New York Fed’s Dudley said markets would respect the implementation plan and not push for faster compliance.
“We gave the long time frame not because banks advocated it, but because we realize the fragility of the economy,” said Swiss National Bank’s Hildebrand, 47.
Bankers also warned regulators that they were assuming it would be easy for lenders to raise fresh capital to comply with the increased requirements. Banks in emerging markets are better capitalized than their counterparts in the developed world because emerging economies have better growth potential, said Bank of America Corp. CEO Brian Moynihan, 51. The Charlotte, North Carolina-based firm is the biggest U.S. lender by assets.
“If you don’t have growth prospects and you increase capital requirements, which means lower returns on equity going forward, where do you find new capital?” Moynihan asked regulators during a panel discussion during the weekend.
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“There are growing signs that global coordination is fizzling and unilateral actions are pending,” said Ackermann, chairman of the IIF, which represents more than 400 financial institutions. “Global banks will have to comply with the higher rules in every jurisdiction, regardless of their home base. That will steal from credit to companies and hurt job creation.”
Lobbying groups are shifting attention to national regulators after the industry persuaded some international rule makers that proposed rules may stunt economic growth. The Basel Committee on Banking Supervision softened planned capital and liquidity requirements last month, then gave lenders about a decade to comply. Countries such as Switzerland and the U.K., which had pushed for tougher rules, are moving ahead with additional restrictions to rein in their banks.
UBS, Credit Suisse
“It’s possible that financial centers may start competing for prudential rigor,’ Charles Freeland, former deputy secretary general of the Basel Committee on Banking Supervision, said in a telephone interview today. “Most banks want to be based in a financial center that is perceived to be well regulated.”
Switzerland last week proposed the first capital surcharge on too-big-to-fail banks. A government-appointed panel said UBS AG and Credit Suisse Group AG need to hold almost double the capital required under Basel III rules. The plans still have to be endorsed by the government and approved by Parliament.
Central bankers that addressed the IIF members during the group’s annual gathering said some rules may surpass Basel III, as the new version of the global capital standards are named. Philipp Hildebrand, president of the Swiss National Bank, Mark Carney, Bank of Canada’s governor, and William Dudley, head of the Federal Reserve Bank of New York, said Basel only set a minimum and more should be expected. Bank of England’s deputy governor Paul Tucker echoed that phrase when addressing reporters at another venue yesterday.
‘Too Much Divergence’
Those central bankers were the same ones pushing for tougher rules and faster implementation within the Basel committee, which is made up bank regulators and central banks from 27 countries, as it formulated its new rules. They were countered by France, Germany and Japan, whose politicians were concerned about the economic impacts of the restrictions, amid warnings from Ackermann, 62, and other bankers. Frankfurt-based Deutsche Bank is Germany’s biggest lender.
In June, the IIF published a report predicting that bank regulations would shave off 3.1 percentage points from economic growth in the developed world. Though the Basel committee’s original proposals were softened, the IIF isn’t reducing that estimate, the industry group said yesterday. That’s because benefits of Basel compromises may be offset if national policy makers enact additional measures and international regulators impose surcharges for the largest banks, the IIF said.
‘Too Much Divergence’
“We never expected 100 percent uniform implementation of Basel rules worldwide, but we’re worried about too much divergence,” said Sands, 48, an IIF board member. London-based Standard Chartered gets more than three quarters of its earnings from Asia.
A study done by the Basel committee and the International Monetary Fund found the impact on those nations’ economies to be about one eighth of the IIF estimate.
Bankers from around the world also expressed concern at the IIF meeting that some national regulators, along with investors in bank stocks, will force a faster adoption of the rules than Basel’s timetable requires. Central bankers sought to ease those concerns. Bank of Canada’s Carney said the timetable won’t be accelerated if banks need breathing space. The New York Fed’s Dudley said markets would respect the implementation plan and not push for faster compliance.
“We gave the long time frame not because banks advocated it, but because we realize the fragility of the economy,” said Swiss National Bank’s Hildebrand, 47.
Bankers also warned regulators that they were assuming it would be easy for lenders to raise fresh capital to comply with the increased requirements. Banks in emerging markets are better capitalized than their counterparts in the developed world because emerging economies have better growth potential, said Bank of America Corp. CEO Brian Moynihan, 51. The Charlotte, North Carolina-based firm is the biggest U.S. lender by assets.
“If you don’t have growth prospects and you increase capital requirements, which means lower returns on equity going forward, where do you find new capital?” Moynihan asked regulators during a panel discussion during the weekend.
http://jodnet.blogspot.com
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