Backlash from bankers

I wrote in my ET column, cited in yesterday's post, that it would be difficult to push through regulation because of the power of banking lobbies.

Josef Ackermann, the Deutsche Bank head, has fired the first salvo, reports FT:

A deluge of financial regulations threatens to harm economic growth, one of the world’s top bankers said on Friday, in what appeared to be the start of a concerted fightback by the industry against feared regulatory overkill.

........There is a trade-off between maximising stability of banks and optimising growth of the real economy. That balance [should] not be forgotten,” Mr Ackermann told the Financial Times. He warned that the entire economy would “pay a high price” if regulation went too far.

.....He cited proposals to raise the quantity and quality of capital banks have to hold, alter the definitions of capital, add capital buffers for systemic firms, rainy-day provisions, liquidity requirements and “living wills” to apply in case of failure.

Mr Ackermann's main contention is that regulators must harmonise rules across the globe, otherwise the global financial system could fragment. True. But, national regulators cannot wait until agreement is reached on all matters. In some cases, they are bound to press ahead, depending on how pressing local needs are. We must hope that if some nations give the lead, that will force others to follow suit. Otherwise, we may have to wait forever for meangingful changes to emerge.

I am not very hopeful that there will be radical changes in regulation. As I have said before, we need a bigger crisis and wider social unrest for that to happen.