Regulation puts global banking in peril

Sid Verma
Published on:

Don’t believe the G20 hype. In interviews with Euromoney, the world’s top financial policymakers admit regulatory tensions are tight. What’s more, the collateral damage of the focus on too-big-to-fail, capital rules and bankruptcy resolution risk rolling back financial globalization. Is it time to change the terms of the discussion?

The drive to address the too-big-to-fail problem and the imposition of resolution regimes dominate the discussion of global banking. But it’s time to talk more about the collateral damage this is causing: the threat to global finance, the growing risk of balkanization of banking, and a crisis in banks’ strategic and capital planning.

Jean-Claude Trichet, former president of the European Central Bank, spoke to Euromoney just before the G20 summit in Brisbane – a meeting where global leaders looked set to pat themselves on the back for reducing risk in the banking system.

Trichet says the agenda needs to move on: "There is now, in all countries, a risk of financial segmentation, a certain risk of financial renationalization. It is very important that the Basel Committee and the FSB are conscious of this and try to respond accordingly. They should do all they can in order to protect financial...