The Great Debate UK
The debate about reforming the financial system is often presented as an argument between regulators on one side and banks on the other. But it is also beginning to throw up some differences among banks. One such rift has been exposed by the suggestion that banks should be forced to hold greater reserves of liquidity and capital in national subsidiaries.
Regulators see this as a way of dealing with the future failure of a big bank. Rather than relying on the bank's home government to pick up the tab -- something it may not be able or willing to do -- each country where the institution operates could take responsibility for its local subsidiary.
Josef Ackermann, chief executive of Deutsche Bank, is concerned that this approach will lead to the fragmentation of the financial system. On Monday, he warned a conference organised by the Financial Services Authority of Britain that it would make markets less efficient and lead to lower economic growth.
However, the chief executive of Abbey, the subsidiary of Spanish giant Santander, told the same conference that his bank already operates along the lines envisaged by regulators: its British, Brazilian, Mexican and Portuguese subsidiaries are all separately capitalised.
One of the most depressing, though predictable, aspects of the financial crisis has been the reluctance of senior bankers to publicly debate the industry’s shortcomings.
Though there has been plenty of finger-pointing in private, bankers have refrained from discussing their own - and each other’s - failures in public. The result is that the debate about the future of banking has been almost entirely conducted by non-bankers.