US treasury secretary Timothy Geithner said there is agreement on both sides of the Atlantic over limiting the risks banks are allowed to take – but he warned against hampering competition.
Speaking with German finance minister Wolfgang Schaeuble in Berlin yesterday he said: “I think we all agree we want more conservative restraints on capital and leverage.”
He claimed there is broad agreement on the need for controls “on risk taking, more conservative capital requirements, bringing transparency and disclosure to derivatives markets and making sure regulators and supervisors can do their jobs in protecting the economy from risk”.
But he warned the scheme must be designed carefully so that it “makes the system more stable in the future but doesn’t create a risk of financial headwinds to the recovery we are seeing happening.”
He did not refer to his earlier criticism of his German hosts over their unilateral move last week to ban naked short-selling of certain assets, which spooked financial markets and angered Germany’s European Union partners.
Schaeuble said the US and Germany are broadly in agreement on the approach to regulation.
He said: “As far as what could be done or what needs to be done with financial market regulations, we’re actually a lot closer with our assessments than it might appear at times.”
He added: “But it’s clear one also has to keep in mind that the traditions and structures of the financial sectors in the US are naturally quite different than in continental Europe and that’s why not everything that goes in the same direction can be translated one-to-one for both areas.”
Geither said that ahead of next month’s Toronto G20 summit there had been progress on a framework for the global financial system, meaning leaders were “in a very good position to put in place a much better system than we had coming into this crisis.”