First sign of 'common ground' on bank rules

But banks and regulators are still some way from detailed agreement
Click to follow

The "Spirit of Davos" may have won through this weekend, with the first signs of a tentative détente between the world's banks, governments and regulators after a week of sharp debate at the World Economic Forum in the Swiss Alpine resort.

However it also emerged that a deal to limit pay and bonuses that was agreed among the world's leading banks last year was scuppered by opposition from Jamie Dimon, chief executive of JP Morgan Chase, and Lloyd Blankfein of Goldman Sachs, who refused to accept restraint.

On the positive side, the chief executive of Deutsche Bank, Josef Ackermann – who has been acting informally as the leader of the global financial community – said after a meeting of bankers, regulators and ministers at the weekend: "On many aspects, we found common ground. There was better dialogue between business leaders, political and regulatory leaders than ever before." Earlier during the Davos conference the chief executive of Standard Chartered, Peter Sands, agreed that politicians and bankers were now speaking a "common language", while Bob Diamond, the president of Barclays, said that he does accept the need for more "intrusive" regulation, and that tougher rules would be a good thing.

Meanwhile President Obama's economic adviser, Larry Summers, affirmed his support for the so-called Volcker Plan to break up the big banks, despite it having been widely reported that he argued against key parts of the proposals framed by Paul Volcker, former chair of the US Federal Reserve.

Mr Summers said: "The policy is a constraint on purely proprietary trading. It is not a constraint on doing business with customers, so it does not by definition interfere with their ability to serve their customers."

President Obama said on 21 January that he wanted to prevent banks engaging in "proprietary trading operations for their own profit, unrelated to serving their customers".

On that issue, however, there remains deep division between regulators and governments. Britain's Chancellor, Alistair Darling, has made no secret of his scepticism about this aspect of the Volcker Plan. And Dominique Strauss-Kahn, the managing director of the International Monetary Fund (IMF), is also sceptical. "We're not going exactly in the right direction," Mr Strauss-Kahn said, in an oblique reference to President Obama's proposals.

But a further sign of a growing consensus are the clear signals both from the bankers and the IMF regarding some form of global or regional "insurance levy", or bank tax, to fund future bank rescues. Mr Ackermann said: "To help solve the too-big-to-fail problem I'm advocating a European rescue and resolution fund for banks. Of course, the capital for this fund would have to come from banks, to a large degree."Mr Diamond added: "I think every G20 country would like to have an insurance scheme that would help cover the cost of any future bank failure. A co-ordinated global system is preferable to an unlevel playing field."

The IMF will present proposals for such a levy at its spring meeting in April.