MILAN, Feb 5 (Reuters) - British Finance Minister Alistair Darling reiterated that breaking up banks and going it alone was not the way to fight the crisis, preferring global coordination, he told Italian daily Il Sole 24 Ore in an interview on Friday.
U.S. President Barack Obama sent shockwaves through markets with proposals to force commercial banks to cut ties with hedge funds and private equity funds and stop proprietary trading.
When asked about the so-called “Volcker rule” to limit risky trading, Darling said: “There has been a lot of talk about the division of banking activities and I confirm that I do not think this is the right way.”
“The U.S. banking reality is very different to the European or British one ... The biggest risk last year was the system, or the contagious effect between institutions. The danger is not the size of institutions but the inter-connection.”
Darling said propriety trading should not be impeded but “it should be sustained by adequate capital”. He said no one could yet say that the global crisis was over.
“There is no need to be tempted to give national responses to a global crisis ... I really would not want for the European and U.S. ways on banking rules to begin to diverge,” he said.
Finance ministers of the Group of Seven leading industrialised nations are meeting in Canada on Feb. 5-6 and Darling said he was going with two objectives.
“First, that the consensus found last year on the need for a right capitalisation for banks ... gets the right political push,” he said.
“I also hope that these ‘wills’ for banks, or what needs to be done to manage them in case of a very serious crisis, take off. In second place, I await coordination in practical terms for sustaining growth in the next months.”
When asked about U.S. bond fund Pimco saying high government debt meant gilts were “resting on a bed of nitroglycerine” and whether Britain was facing similar troubles to Greece, he said “Let’s put aside individual opinion.”
“There is no Greek scenario as you say for Britain. We have a much bigger economy and we have a clear plan to reduce our deficit, halving it in four years, even before if growth is more robust that my forecasts,” he said. (Editing by Andy Bruce)