Financial Regulatory Forum

Bank reform may have $220 billion global capital hit – analysts

LONDON, Feb 17 (Reuters) – Top global banks will need an extra $221 billion of capital and see annual profits slump by $110 billion if all proposed regulations to reform the industry are brought in, leading analysts said on Wednesday.

If all the initiatives from regulators are implemented it would cut the average return on equity to 5.4 percent from 13.3 percent next year, hurt economic growth and raise costs for bank services, JPMorgan analysts warned.

“The cumulative impact of all the proposed regulation suggests that there is a real risk that we may move from a system that was under regulated to one that is over regulated and that that could cause a significant increase in lending costs and a negative impact on the economy,” Nick O’Donohue, head of research at JPMorgan, said in a research note.

The capital needs of banks would be $221 billion higher in the extreme event that all the reforms were brought in.

British banks alone would need $91 billion, other European banks would need $86 billion and U.S. banks would need $44 billion, JPMorgan estimated.

Bank of England’s King says UK, US closer than EU on regulation

It's closer across the Atlantic

It's closer across the Atlantic

 (Updates with more quotes, details from report)

LONDON, Feb 12 (Reuters) – Britain and the United States are more convinced of the need to force banks to hold more capital than some big European nations, Bank of England Governor Mervyn King told the Council for Financial Stability last month.

The minutes of the meeting between the BoE, the Treasury and the Financial Services Authority on Jan. 14, published on Friday, showed King felt the task of getting nations to agree to stricter rules for banks “should not be underestimated”.

The G20 group of developed and emerging nations has been looking at ways to strengthen regulation after the credit crisis but there have been concerns that a show of unity at the height of the crisis may fall apart as the global economy recovers.

US Stock exchange heads take aim at ‘Volcker rule’

By Jonathan Spicer

NEW YORK, Feb 9 (Reuters) – The heads of the top U.S. stock exchanges have poured cold water on the Obama administration’s plan to bar banks from proprietary trading.

The chief executive of NYSE Euronext said on Tuesday the president’s plan falls short of targeting what caused the financial crisis, while his counterpart at Nasdaq OMX group Inc, the day before, said the plan would probably have to be changed.

Obama last month surprised Wall Street with the ambitious proposal to limit risky trading by banks. Dubbed the ‘Volcker rule’ after Paul Volcker, the White House economics adviser, it would bar banks from proprietary trading, or placing bets on markets with their own money.

Obama bid to rein in banks meets Senate resistance

By Kevin Drawbaugh

WASHINGTON, Feb 4 (Reuters) – The U.S. Senate on Thursday looked increasingly likely to adopt, at best, only a watered-down version of the Obama administration’s ambitious proposal to limit risky trading by banks.

After two hearings in three days on the issue, Senate Banking Committee Chairman Christopher Dodd told reporters it will be difficult to legislate a curb on bank trading practices as specific as the White House proposed last month.

He said it would be easier to include something less ambitious in a sweeping package of financial regulation reforms, under development for more than a year now, which aides said was fast nearing completion.

S.Korea sees no need for US-style reform of banks

FINANCIAL/KOREA-CAPITAL    SEOUL, Feb 3 (Reuters) – It is not desirable for South Korea to adopt U.S.-style banking reforms because the local industry and markets are still small and in the developing stage, the head of the top financial regulator said on Wednesday. (more…)

China banks call back loans to satisfy regulators

CHINA   BEIJING, Feb 3 (Reuters) – Two of China’s biggest banks aggressively called back loans in the second half of January to fall into line with the government’s directive to slow lending, local media reported on Wednesday. (more…)

Major global banks split on regulation battle

By Lisa Jucca and Martin Howell

DAVOS, Switzerland, Jan 29 (Reuters) – The world’s top financiers are at odds about how to fight back against a global push for tougher financial regulation, with commercial and investment banks struggling to reach common ground.

Top executives from Wall Street and Europe’s leading banks have been holding behind-the-scenes talks at the World Economic Forum in the Swiss ski resort of Davos, sources close to the negotiations said, but a deal has proved elusive.

Wall Street’s largest and some major European investment banks argued in favour of a tough common front against politicians who are calling for much tougher measures to regulate the industry in the wake of the financial crisis.

INTERVIEW-UK’s Darling-breaking up banks not the answer

By Sumeet Desai

LONDON, Jan 28 (Reuters) – Breaking up banks and going it alone in reforming regulation is not the magic solution to avoiding future crises, British finance minister Alistair Darling told Reuters on Thursday.

In an interview ahead of going to the World Economic Forum in Davos, Switzerland, Darling also brushed aside concern that UK government bonds were a ticking time bomb, pointing out Britain’s funding requirements were lower than many other countries.

U.S. President Barack Obama sent shockwaves through markets last week with proposals to force commercial banks to cut ties with hedge funds and private equity funds and to stop proprietary trading.

BoE’s King calls for radical reform of banks

By Tim Castle

LONDON, Jan 26 (Reuters) – Radical reform is needed to make the banking system safer, Britain’s top central banker said on Tuesday, adding U.S. President Barack Obama’s plan to curb some activities would not fully solve the “too big to fail” problem.

Bank of England Governor Mervyn King said there was no “silver bullet” to solve the banking sector’s problems, and tinkering with regulation alone, such as bumping up capital and liquidity requirements, would not be enough when “stuff happens”.

Radical reforms were also needed to change the liability structure of the banking system, so creditors can’t simply walk away unscathed when a bank fails, King said.

BREAKINGVIEWS-Obama reforms could undermine global bank rules

G20/ By Peter Thal Larsen and Hugo Dixon

LONDON, Jan 25 (Reuters Breakingviews) – The overhaul of the global financial system has entered a new, more complicated phase. For two years, a fragile multilateralism has prevailed as the world’s largest economies agreed that changes should be designed and adopted on a global basis. The task of redesigning financial regulation was largely delegated to central bankers, regulators and other technocrats.

That consensus is creaking following President Barack Obama’s double-barrelled attack on Wall Street investment banks. The new tax on banks’ wholesale liabilities and the planned prohibition of proprietary trading by deposit-taking institutions both complicate the aim of getting a new effective global regime for regulating the industry — but in different ways.

Look first at the new tax. In principle, it is sensible to charge large financial institutions for the implicit guarantee they receive from taxpayers when they rely on hot short-term money to fund themselves. But there is already a global push, under the aegis of the G20, to boost the size of banks’ capital and liquidity cushions. This exercise, being masterminded by the Basel Committee, has now entered the “calibration” phase — where the precise numbers are being modelled.

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