FT (Davos) – Two of the world’s most influential financial regulators have defended their drive to crack down on banks and urged the industry to accept the need for behavioural change.
At a Credit Suisse lunch on the fringes of the World Economic Forum in Davos, Hector Sants, chief executive of the UK Financial Services Authority, admitted that banks were prepared to accept the need for higher capital and liquidity buffers in future. But he said it was “not obvious” they had fundamentally changed. “Behaviour has to change. It is not at all clear that the majority of the industry has grasped that.”
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Philip Hildebrand, the governor of the Swiss central bank, told recalcitrant banks that it was a “silly notion” to perceive the regulatory overhaul drive as a conflict between regulators and banks. “We need to jointly fight to preserve a market-based financial system,” he said.
Both men said recent bank regulation initiatives by US President Barack Obama were a helpful impetus to regulators around the world. But they also urged the US to engage more fully in a process to co-ordinate regulation effectively on a global basis. “We cannot have a robust framework without strong US engagement,” Mr Hildebrand said.
Mr Sants said nonetheless that he was encouraged by the broad consensus that had emerged on the need for reforming areas that are vital to restoring financial strength – principally reforms to capital, liquidity and accounting.
He said it would be wrong to confuse the ongoing row over bankers’ pay – and a political desire to exact retribution – with fundamental bank strength.
However, both men admitted that in the current environment, excessive pay had the potential to disrupt the key task of strengthening capital reserves. “Progress there is a bit slower,” Mr Sants said.
Source: Financial Times of London
By Patrick Jenkins, Banking Editor, in Davos SWZ; Published: January 29 2010 13:28 | Last updated: January 29 2010
