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Bankers hit the Go-Slow alarm on regulatory crackdown:
By Kevin Drawbaugh and Dave Clarke
WASHINGTON | Sun Oct 10, 2010 7:18pm BST
WASHINGTON (Reuters) - A global crackdown on bank oversight could undermine a fragile economic recovery if governments move too fast and fail to cooperate, international bankers warned at a conference on Sunday. Amid mounting currency tensions and talk of new surcharges on the industry, some of theworld's top bankers appealed for a gradual approach to implementing the Basel III accord on capital and other banking reforms.
The bankers expressed fears that individual governments will go beyond the Basel III deal struck last month between finance ministers from 27 countries that will force tougher capital and liquidity requirements on banks by 2019 so they can better withstand economic downturns and financial shocks. "There are many troubling developments that we are now seeing on regulatory reform," said Josef Ackermann, chief executive of Deutsche Bank (DBKGn.DE) and chairman of the Institute of International Finance, an industry group. Ackermann and fellow IIF leaders criticized talk that governments might impose surcharges based on banks' size requiring the largest of them to hold more capital than already called for in the Basel agreement. "The focus should not be on penalizing firms just because they are big," Ackermann said. "Interconnectedness is at least as important, as we learned with the collapse of Lehman Brothers." He also emphasized a concern bankers at the meeting have been sounding all weekend -- governments should not seek to accelerate the 2019 deadline for fully implementing the new reforms. "It is very important that the official authorities ensure that the Basel implementing timetable is fully respected," Ackermann said. BANKERS DESCEND ON WASHINGTON The IIF held its annual meeting here this weekend alongside the fall meetings of the International Monetary Fund and the World Bank, mixing thousands of gray-suited bankers with the usual throngs of weekend tourists on Washington's streets. At the meeting, regulators from many countries have pushed back against bankers' concerns, arguing they are overstated. "Banks have many ways they can adjust their business models to meet the new standards as they are phased in," William Dudley, the head of the Federal Reserve Bank of New York, said on Sunday. "Many of these changes can occur without any risk of disruption to the flow of credit to households and business." Bankers and regulators at the IIF annual meeting have found common cause, however, on the notion that if new bank rules and capital reforms are not coordinated internationally, then they will have less impact and could create opportunities for mischief or economically risky behaviour in countries with lax regulatory environments. Ever since the 2007-2009 financial crisis, regulators worldwide have moved to tighten oversight of big banks, which have resisted U.S. and European Union reforms, even as many banks have edged towards more conservative business models. While acknowledging a need for changes to help prevent a recurrence of the crisis and the recession that followed, the banks have sought to protect their profitability and growth from costly new rules and limits on their activities.