CITY minister Lord Myners yesterday poured cold water on President Barack Obama’s bid to overhaul the banking rules, warning that Britain would not be following the proposed US reforms.
Myners told City A.M. that efforts by the US administration to curtail banks’ investments in hedge funds, private equity and proprietary trading were “in no way central” to the problems which led to the global financial crisis.
He added that the UK wasn’t planning to sign up. “The step is not one we’d be minded to follow,” he added.
Speaking to City A.M. Myners said: “The proposals could have significant consequences for UK banks. Our banks are global banks and therefore any measure affecting the global banking sector could potentially have a disproportionate effect on the UK.”
Myners will today host a meeting in Downing Street with representatives from the G7 nations, the IMF, the FSA and the Bank of England, to discuss ways to address the problem of “too big to fail” banks. On the agenda will be requirements for banks to hold more capital in order to absorb future losses, as well as proposals for banks to pay an “insurance premium” into an international fund which could be used to shore up the sector in future crises.
Myners also downplayed talk of a Tobin tax on financial transactions. “The Tobin tax continues to be reviewed by the IMF, but it needs universal adoption or trading will gravitate towards other financial centres,” he said. “It is not imminent.”
His rebuttal of the US proposals comes after chancellor Alistair Darling at the weekend indicated concern that Obama’s measures risk derailing attempts by the G20 to achieve coordinated agreement on banking reform.
The government’s line contrasts with the message from the Tories, after shadow chancellor George Osborne’s spokesman confirmed yesterday that Obama’s proposals have the party’s backing.
However, he cautioned that the Conservatives would not sign up without greater international cooperation, probably secured via the G20.
Angela Knight, CEO of the British Bankers’ Association (BBA), said the big problem for UK banks is the lack of clarity on how the new proposals will be implemented. “If the hedge fund crackdown extends to currency or oil hedging, for example, then it will do far more damage to UK banks,” she said.