City of London, U.S. lobbies are fighting market regulation – Germany

September 23, 2009

German Finance Minister Peer Steinbrueck arrives to the weekly cabinet meeting in Berlin, August 5, 2009.   REUTERS/Fabrizio Bensch (GERMANY POLITICS) BERLIN, Sept 23 (Reuters) – The City of London is doing its best to block the introduction of stricter financial market regulations, but tougher rules will come, German Finance Minister Peer Steinbrueck said a day before a Group of 20 summit.

Steinbrueck told Germany’s Stern magazine he hoped new rules on bankers’ bonuses could be agreed at the summit in Pittsburgh on Thursday and Friday.

But he added that the financial services sectors in Britain and the United States were resisting stricter regulations.

“There is clearly a lobby in London that wants to defend its competitive advantage tooth and nail,” Steinbrueck told Stern in the interview released on Wednesday.

“In the United States, too, the financial industry is evidently putting a lot of pressure on Congress with the message: ‘don’t take things too seriously with regulation’.”

Steinbrueck said Britain was having an especially hard time, “to put it politely”, agreeing to tougher regulation of hedge funds.

Steinbrueck has criticised Britain before on the issue of regulation. In July, he accused the British government of hindering efforts to reform global financial markets because it is too eager to pander to the City of London.

However, he told Stern: “I am sure: we will make lasting changes to the rules of play for the financial markets.”

“At the G20 meeting in Pittsburgh we will hopefully get a rule whereby bonuses will be limited to a proportion of fixed salaries,” he added.

A spokesman for the British Treasury said Britain had led international efforts to “end the risky pay and bonus culture in the global banking industry”.

“Our proposals for clawback and deferral of bonuses in addition to much greater transparency have become the international blueprint for reform,” the spokesman said.

“We will continue to work with other nations — including our G20 partners in Pittsburgh this week — to make sure pay policies are structured in the long-term interests of financial stability,” he added.

The European Union unveiled its blueprint on Wednesday for an overhaul of the way banks and financial markets are policed, a central plank of new rules designed to prevent a repeat of the global economic crisis.

It plans to create a banking super-watchdog, with power to overrule countries such as Britain, and a pan-European supervisor that would warn of early signs of crisis.

Stuart Fraser, chairman of the Policy and Resources Committee at the City of London Corporation, said the British financial sector broadly accepted the need for “proportionate regulatory reform”.

“However, any reforms must be rigorously assessed, carefully targeted and implemented on a global level,” he added.

“World leaders must recognise that a ‘one size fits all’ solution is impractical, while simultaneously offering a coherent global regulatory framework. Striking the right balance between these two should be a key issue at the G20 and we welcome the current debate that is taking place,” Fraser added.

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