LONDON, October 31 (Global Risk Regulator) – Failure to reach agreement on tougher financial regulation at this week’s world leaders’ summit should not stop Europe acting alone, according to Germany’s finance minister.
>“I would prefer us to reach agreement in the G20 (the Group of Twenty biggest economies),” finance minister Wolfgang Schäuble said in an interview published in today’s UK Financial Times newspaper.
“But before we use the G20 as an excuse for doing nothing for a long time, if we cannot reach agreement there, I am in favour of going ahead in Europe,” Schäuble said, speaking ahead of the G20 leaders’ summit due to be held in the French Mediterranean resort of Cannes on Thursday and Friday. The gathering will consider the raft of reforms, many of them controversial, developed under the aegis of the G20 with the aim of improving the resilience of the world’s financial system in the wake of the 2007-09 global financial crisis. But the summit’s likely to be dominated by the need to stop the European sovereign debt debacle from becoming a second global crisis and by efforts to spark life into flat-lining economies.
Schäuble wants the European Union to take the global lead in introducing a financial transaction tax to curb speculation, along with tougher regulation of banks and the so-called “shadow” banking sector, including hedge funds.
But Reuters news agency today reported a senior German official as saying the summit is unlikely to fulfil German hopes on financial regulation, including the matter of hedge funds and the transaction tax.
The tougher banking capital and liquidity rules, together with capital surcharges for the world’s biggest banks envisaged by G20 regulators, are opposed by the world’s banking industry which argues the measures would cut bank lending and thus stifle the economic growth craved so desperately by the politicians meeting in Cannes.
Meanwhile, there are fears that internationally agreed reforms could damage national interests. JP Morgan Chase chief executive Jamie Dimon has decried Basel III, the banking reform package at the heart of the G20 measures, as anti-American. And British critics fear the G20 reforms as filtered through the EU’s rule-making process could damage the competitive edge of the City of London as a global financial centre. In particular the UK government doesn’t like the idea of a financial transaction tax, which would fall disproportionately on London and which, the UK argues, would only work if imposed globally. Schäuble said in his FT interview that if Britain blocked an agreement on such a tax, the eurozone should press ahead on its own.
David Keefe (email@example.com)