Global finance chiefs told commercial banks at the weekend that resisting tighter regulation of the industry was futile,though bankers warned the reforms could hurt economic recovery.
US Treasury Secretary Timothy Geithner said policymakers would introduce reforms carefully,but added that “sweeping changes” were needed and banks could not argue with that.
“We’re not going to adopt an approach that does stuff at the margin,and delays any changes that help preserve a bunch of practices that helped make this crisis much more damaging than it otherwise would have been,” he said.
The Institute of International Finance (IIF),a group representing some of the world’s biggest banks,met in Istanbul at the weekend alongside a conference of finance ministers and central bank chiefs of the Group of Seven rich nations.
In years past,the groups have tended to see eye-to-eye. But in the wake of the global financial crisis,they differed on how radically the banking industry should be reformed to reduce the risk of another crisis.
Last month,leaders of major economies agreed in principle to reforms that would restrict bankers’ bonuses to avoid excessive risk-taking,require banks to keep more capital on hand as insurance against volatility in markets,and increase regulators’ ability to monitor and intervene in the industry.
IIF chairman Josef Ackermann,who is chief executive of Deutsche Bank (DBKGn.DE),complained that stricter regulation might be damaging if it was introduced too quickly or unevenly.
“I believe there is a very real risk that as central banks and governments strive to avoid premature shifts away from supportive monetary and fiscal policies,regulatory reforms come into force that could undermine global recovery and job creation,” he said.
The IIF said in a statement that the cumulative impact of multiple proposals to reform banks’ capital,liquidity,leverage,underwriting and compensation needed to be assessed.