Erratic global reforms tempt next banking crisis

By Rachel Armstrong, Huw Jones and Kevin Drawbaugh


HONG KONG/LONDON/WASHINGTON (Reuters) – Quirks in the way countries implement global pledges to toughen up financial rules may cause regulators to hit the wrong targets while failing to prevent another crisis.

Regulators, bankers and exchange heads told the Reuters Future Face of Finance Summit that new rules such as the Dodd-Frank reform of Wall Street will only be effective if they are matched globally.

A patchy rollout will also trigger regulatory arbitrage, sending money and talent flowing to the friendliest sectors, while putting firms in the strictest regimes at a disadvantage in the global capital markets.

“Dodd-Frank will really work if the rest of the world follows the bulk of what we do here,” IntercontinentalExchange Inc (ICE.N) Chief Executive Officer Jeffrey Sprecher said.

That is a tall order, despite efforts by the Group of 20 leading economies to coordinate their actions.

Differing political appetites for change mean that the United States is pushing ahead with a tougher line on reshaping trading rules, while Europe is pressing down harder on bonuses.

Asia, meanwhile, fared relatively well during the crisis and is enjoying the luxury of taking its time to decide how to implement change. As a result, it is likely to end up with a more buoyant financial sector backed by heady economic growth.

Continue reading here.


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