WSBI President pleads for differentiated bank regulation : Stable institutions should not suffer from the misconduct of some big banks
[27 08 2012]
WSBI President Heinrich Haasis has called upon international policymakers involved in financial regulation to make a distinction between international banks focused on the virtual financial markets and regional institutions focused on clients. “Given the erratic behaviour of many international megabanks, it is hardly surprising that politics and the public at large want to regulate the banking sector more aggressively. However, this should be done in such a way that misconduct is eliminated and that the activities of regional institutions are not hampered. Megabanks cause most of the trouble, but regional institutions are hit hardest by the regulation”, declared the WSBI President. Mr Haasis was particularly critical of the recent Libor rate-rigging scandal, in which a handful of megabanks ruined the reputation of the whole sector.
Haasis pointed out that regional financial institutions with a broad customer base have proven their stabilising effect during the crisis and have thus gained the public’s respect. Regulatory and supervisory initiatives of the G20, Basel Committee and EU have not taken this into account. Almost all regulations have been designed for international megabanks but will apply to all banks, despite the fact that they are not appropriate for regional banks. These undifferentiated rules are detrimental to those financial institutions that did not cause the crisis. Policymakers systematically shift the burden of competition to regionally active institutions and in doing so favour international megabanks. Controlling megabanks is important, but so is protecting what stimulates regional banking institutions, which happens to be what stimulates the economy – lending. This is valid for developed and developing countries alike.
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