French banks are pleased that, during the recent Toronto summit, the G20 confirmed its objective of a "more resilient financial system (...) which is able to support solid and stable economic growth". However, they believe that some of the most important measures under discussion do not have this goal and may drag down European growth. The next summit in Seoul therefore remains an essential step.
Prudential reform is essential as it gives structure to the European economy, almost three-quarters of which is financed by banks. The FBF noted that an agreement on new capital and liquidity requirements is expected to be reached at the Seoul summit in November 2010. It also approves the clear affirmation that, when calibrating measures and setting the implementation schedule, the impact on the economy will be taken into account.
However, the FBF is underscoring that, in the current Basel Committee projects, certain proposals are not appropriate and must be reviewed or withdrawn. More generally, the FBF is insisting that risk measurement remain a cornerstone of banking and financial activity regulation, in accordance with the Basel principles. Adding a financial leverage ratio to the Basel III regulations, with the intention of making this a compulsory standard, clearly goes against this approach. This would lead to huge technical issues, assuming that we want to avoid European banks being more restricted than other banks in terms of their ability to finance the economy.
Moreover, although specifically monitoring major institutions or markets is justified, implementing specific prudential treatment for so-called systemic financial institutions constitutes a dangerous approach. This effectively gives credence to the idea that institutions can be bailed out whatever the situation, even though the G20 is planning positive measures to resolve crises without impacting the taxpayer.
Lastly, the FBF recognises the efforts of the G20 in terms of the over-the-counter markets, which are moving in the right direction, but also highlights the importance for Europe of playing a key role in implementing infrastructures, particularly clearing houses for standardised derivatives.
The FBF regrets the fact that the G20 only set itself the target of converging international accounting standards. As the quality is these standards is essential, the principle of fair value must not be broadened even further in the work of both US and European standardisers. The extension to retail banking activities in particular would cause additional instability which could seriously harm the financing of the economy.
No agreement on a global bank tax was reached at the G20, as national characteristics must prevail. The declaration underlines the legitimacy of a tax which would enable funds committed by certain Governments to be recovered or to finance crisis resolution. The FBF underscores that the economic stimulus package implemented in France via the banks in late 2008 enabled continued financing of the economy in 2009 under better conditions than other European countries and did not add to the Government's deficit.
French banks, which will have to face up to new regulatory requirements, now need their capital more than ever in order to continue to lend and drive their efforts to promote growth and job creation.
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