France, UK back Obama’s bank plan
Proposal to curb size and trading welcomed
LONDON: France, Britain and Germany have offered some support for US President Barack Obama’s plan to curb banks’ size and trading activities, which has stunned markets and could rewrite the world’s financial order.
But, with each having their own ideas on banking regulation, they fell short yesterday of pledging to follow suit and experts said Obama’s dramatic initiative could cloud the global approach fostered by the Group of 20 nations.
Obama made his proposals on Thursday, saying he was ready to fight resistance from Wall Street banks he blamed for helping cause the global financial crisis.
The plan would prevent banks from investing in, owning or sponsoring a hedge fund or private equity fund.
It would set a new limit on banks’ size in relation to the overall financial sector and, perhaps most dramatically, could also bar institutions from proprietary trading operations, which are unrelated to serving customers, for their own profit.
French Economy Minister Christine Lagarde welcomed the proposal, saying it was a “very, very good step forward”.
A spokesman for British Prime Minister Gordon Brown said he was “comfortable” with the thrust of Obama’s plans but needed to look at the details as different countries had dif- ferent needs.
But Britain’s opposition Conservatives, tipped by polls to win an election to be held by June, offered more solid support. “President Obama has created a lot of space for the rest of the world to come up with what I think would be a sensible system of inter national rules,” Conservative finance spokesman George Osborne told BBC Radio.
“I have said consistently that we should look at separating retail banking from activities like large-scale propriety trading and that this was best done inter nationally.”
Doubts remain as to whether Obama’s scheme will be enacted unchanged, not least since his party lost a key Senate seat this week, depriving it of a “super majority” in that house. Nevertheless, it will strike a popular chord.
Banks’ retur n to paying massive bonuses has prompted public and media outrage in the US and Europe after taxpayer money was used to bail many of them out.
Wall Street sold off on Thursday and the threat that other countries will follow Obama’s lead rattled European lenders.
The German finance ministry stressed the need to move forward inter nationally and said Berlin would present its own proposals on improving banking regulation. – Reuters