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FT: Global Finance: Conflicting Signals

Author: Brooke Masters
April 1, 2012

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Post-crisis pledges by world leaders to work toward harmony in regulating banks and markets are in danger of coming to naught, writes Brooke Masters for the Financial Times.

When financial regulators from 27 countries gathered in the Swiss city of Basel in September 2010 and agreed to force the world's banks to hold more and better quality capital, bankers and politicians hailed the agreement as a watershed. The deal, known as Basel III, was expected to be the first of many steps toward a safer, fairer and better policed global financial system and a bulwark against a repetition of the 2007-08 crisis.

Fast forward 18 months and progress is not so clear. While everyone agrees markets should be easier to monitor and no bank can be "too big to fail", many countries are putting forward contradictory and competing proposals on both. Even on bank capital, the one big success story, unity is breaking down as European Union, UK and US authorities accuse one another of watering down or delaying the tougher standards.

"Global unity is now noticeable by its complete absence," says Simon Gleeson, a UK-based regulatory partner at Clifford Chance, the law firm. "What it demonstrates is that we need a greater degree of international co-ordination than we actually have."

The disharmony is confusing and expensive for banks, which are spending billions of dollars to prepare for and comply with the various rules and fear they will be unable to compete with more lightly regulated peers in other countries. "It's a bloody nightmare. The regulators have no respect for one another at all. Each country is looking after itself," says a senior executive in charge of regulation at one of the world's biggest banks, echoing a sentiment voiced by peers at five other global institutions.

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