| WASHINGTON, April 22
WASHINGTON, April 22 A U.S. plan to force
foreign banks to hold far more capital could sow discord among
supervisors and lead to retaliation from abroad, European Union
financial services czar Michel Barnier said on Monday.
It was the second time in less than a week that EU
misgivings about Washington's aggressive stance in applying
domestic rules on foreign banks became public.
"The (rule) would seem to represent a radical departure from
the existing U.S. policy on consolidated supervision of (foreign
banks)," Barnier said in a letter to Federal Reserve Chairman
Ben Bernanke, dated April 18.
"(It) may frustrate the efforts to ensure a consistent
implementation of the Basel III standards across jurisdictions,"
Barnier also said, referring to a global accord on the maximum
amount of money banks can borrow.
Politicians across the world cracked down on risky bank
practices in 2009 after the financial crisis, but many of the
rules are still not complete years later, and countries are
haggling about a rising number of issues.
The Fed in December launched a plan that would force foreign
banks to hold as much capital as U.S. banks, regardless of how
their overseas parent companies are funded. The Fed did not
immediately respond to a request for comment.
The measure could be particularly costly for Deutsche Bank
, Germany's flagship lender, and to a lesser degree
for the UK's Barclays, because of the corporate
structure of these two European banks.
The plan, authored by Fed Governor Daniel Tarullo, would be
a breach with a U.S. tradition of relying on foreign supervisors
to watch overseas banks and allowing them to hold less equity in
America than their domestic counterparts.
In a separate April 18 letter, Barnier and a host of other
international regulators have also complained about U.S. rules
for derivatives regulation to U.S. Treasury Secretary Jack Lew.
The U.S. derivatives regulator wants foreign banks to stick
to the same rules for trading swaps as U.S. firms, but other
countries are urging it to rely more on the rules abroad, with
international negotiations ongoing.
The pressure from Barnier came ahead of a meeting of the G20
most powerful economies of the world this weekend, which touched
on certain financial regulation issues, such as the reform of
The EU and the United States want to include the financial
services sector in a free trade agreement they are hammering
out, but this would take several years to complete, and any
issues now need to be resolved separately.