The buzz in the halls here at Davos continues to be about financial regulation. Yesterday the world’s largest banks had a closed-door strategy session, and tomorrow they’re meeting with regulators and policy makers, including U.S. Congressman Barney Frank.
This afternoon Deutsche Bank CEO Joseph Ackermann gave an update on what the financial services folks are thinking. A lot of these guys get together at what the World Economic Forum calls a “governors meeting,” and Ackermann was explaining to an auditorium full of people what they talked about.
The first point of discussion seemed pretty spot on: how other industries like aviation and agriculture deal with risk management. Perhaps there are some lessons to be learned. Perhaps bankers should figure those out and internalize them.
Pretty quickly, though, Ackermann fell into the “woe is us” routine, complaining that a few rotten apples had given the entire financial services industry a bad name: “Seldom have so few done damage to so many.” Really? We’re going to do that again?
That’s not exactly the sort of contrition seething populations (not to mention legislation-writing politicians) in countries like the U.S. and the U.K. are looking for. Did anyone mention to Ackermann that this session was open to the press?
Now, it was nice to hear that the bankers support increased capital requirements, and that they are open-minded about a new global insurance fund that they’d pay into to cover events like this in the future (instead of turning to taxpayers).
But then the aura of co-operation went away. The bankers don’t support any new taxes or proposals that could add uncertainty to the market. While they feel like someone should “do something” about the “compensation issue,” they didn’t have any thoughts on what that something should be beyond what the G20 has already put on the table.
The bankers are also in favor of a global regulatory framework. At first blush, that seems very sportsmanlike. Unless, that is,they want folks focused on global regulation because they know it won’t come to fruition. I asked a couple of economist types about this and the response was pretty much: “Duh.”
When you think about it, it is funny. The big argument for a unified approach to regulation is to avoid the opportunity for arbitrage among countries. Has a banker ever met a form of arbitrage he didn’t like?