Financial Regulatory Forum

G20 may blacklist regulatory havens – UK finance minister

By Reuters Staff
October 3, 2009

Britain's Chancellor of the Exchequer, Alistair Darling, attends a news conference at the G20 Finance Ministers meeting, in central London September 5, 2009. ISTANBUL, Oct 3 (Reuters) – The Group of 20 major nations may blacklist countries that have lax financial regulation and impose sanctions on them, mirroring its crackdown on tax havens, Britain’s finance minister was quoted as saying.

“Just as we want to go after tax havens, we want to go after regulatory havens as well,” Alistair Darling told Emerging Markets magazine in an interview published on Saturday.

“It is not good for financial stability that some companies can operate out of a Caribbean island, and shelter behind a veil of secrecy, and we don’t know what they are up to.”

Darling’s remarks, some of the strongest yet on the issue by a senior G20 official, suggested the group was determined to impose financial reforms comprehensively around the globe to reduce the risk of another credit crisis.

The G20, which groups the United States and other rich countries along with developing nations such as China and India, is pushing for wide-ranging changes in financial regulation — from bank capital standards and bankers’ pay to corporate accounting rules and supervision of financial institutions.

Emerging Markets magazine said the Financial Stability Board, which coordinates the G20′s regulatory initiatives, would prepare a “provisional blacklist” of regulatory havens by a meeting of G20 finance ministers in November, as well as a grey list of countries that also should tighten standards.

The FSB will suggest the use of positive sanctions, such as help with improving a country’s regulatory capacity, as well as negative sanctions, such as raising the cost of doing business with banks in a blacklisted area, the magazine reported.

Darling, visiting Istanbul for a meeting of finance officials from the Group of Seven rich nations and the International Monetary Fund’s semiannual meeting, was quoted as saying big institutions which triggered the credit crisis had traded in every corner of the globe.

“We have an interest in making sure that the regulatory regime is robust, so that you don’t end up with banks falling between stools,” he said.

“I am concerned about countries that don’t have such robust regimes. As it becomes less and less clear what exactly their arrangements are, that could have quite a destabilising effect on other countries.”

The G20′s crackdown on tax havens has had considerable success. G20 leaders agreed in April to name and shame the world’s tax havens with a public list, and threatened sanctions for countries not falling into line.

Since then, some European countries, such as Switzerland, have made concessions on bank secrecy laws in an effort to get off the list. On Thursday, the government of France said French banks had promised to close all their branches in jurisdictions considered to be tax havens from March 2010 onwards.

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