France, UK back Obama’s bank plan

Pro­posal to curb size and trad­ing wel­comed

Weekend Argus (Saturday Edition) - - WORLD -

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

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