The Bankwatch

Tracking the consumer evolution of financial services

G20 draft communiqué & FT interview with Obama indicate more regulation coming to Banks

Lionel Barber at the FT interviews US President Obama in advance of the G20 meeting Thursday.  Despite the broad sweeping answers it seems unlikely that we will see much tangible outcome from the session, but the G20 draft communiqué (below) is clear about stronger regulation.

Obama interview: Full text | Financial Times

FT: Let’s talk about the G-20. What will be your benchmarks for success?

Obama: The most important task for all of us is to deliver a strong message of unity in the face of crisis. There’s some constituent parts to that. Number one, all the participating countries recognise that in the face a severe global contraction we have to each take steps to promote economic growth and trade; that means a robust approach to stimulus, fighting off protectionism.

Next, we have to make sure that we are all taking serious steps to deal with the problems in the banking sector and the financial markets and that means having a series of steps to deal with toxic assets and to ensure adequate capital in the banking sector.

Third, a regulatory reform agenda that prevents these kinds of systemic risks from occurring again and that requires each country to take initiative but it also requires coordination across borders because we have a global, we have global capital markets, and that will include a wide range of steps, additional monitoring authority coordination of supervisors and various countries dealing with offshore tax havens.

The G20 draft communiqué has been leaked to the FT and some directional clues are there.  While the debate on stimulus and protectionism are less clear there seems little doubt we will see more regulation and regulation that is sweeping in nature across countries, Banks and economies … some snippets here, but worth reading if interested to get full context in the 2 or 3 pages.

Reforming financial systems for the future

14. We recognise that weaknesses in the financial sector and in financial regulation and supervision were fundamental causes of the crisis. …

• to work closely and systematically, in accordance with the Financial Stability Forum framework, to supervise cross-border institutions and to complete the establishment of colleges of supervisors for all significant cross-border financial firms;

• to improve over time the quality, quantity, and international consistency of capital in the banking system. Capital requirements should not be strengthened until a significant and sustained economic recovery is assured and the transition managed to ensure that the extension of credit is not constrained. Regulation should limit leverage and require buffers of resources to be built up in good times which banks can draw down when conditions deteriorate;

• each of us commits to candid, even-handed, and independent IMF surveillance of our economies and financial sectors, of the impact of our policies on others, and of risks facing the global economy;

Written by Colin Henderson

March 29, 2009 at 20:29

Posted in regulation

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  1. […] is the sub title in the Communiqué relative to bank regulation.  It has been amended from the draft version earlier in the week, from “Reforming financial systems for the future” to the final version […]


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