Banks face pressure to get dull
If the U.S. Congress approves financial regulation reform -- and that looks likely to happen soon -- banking stands to become a duller business.
On the out list will be unrestrained trading desks spitting out exotic debt instruments. On the in list will be the banker trying to find a solid 30-year fixed-rate mortgage for borrowers with good income.
That culture shift is a specific goal of the Obama administration and congressional Democrats, seeking to reshape bank oversight after the worst financial crisis in 70 years.
The U.S. action follows huge taxpayer-funded bank bailouts and parallels efforts in Europe to tighten oversight. Measures could include new taxes on financial institutions and higher capital requirements.
With this as a backdrop, the annual Reuters Global Financial Regulation Summit will convene April 26-29, with top lawmakers and regulators scheduled to participate in a series of exclusive interviews with senior Reuters journalists.
Most of the summit will occur in Washington, D.C. Bureaus in London, New York and Brussels will also be venues.
The U.S. legislation is expected to come before the Senate on Monday. The House of Representatives has already approved a similar bill. President Barack Obama could sign bank reform into law by mid-year, policy analysts say.
If approved, the reforms will result in more limits on fee income, higher capital requirements, and more regulatory burden. That will strain bank profitability, said Concept Capital financial services policy analyst Jaret Seiberg.
Yet this could be worse. We still expect provisions that could threaten the viability of the industry to be kept out of the legislation.
This legislation continues to move down the path of a moderate, bipartisan bill, Seiberg said.
GOLDMAN RAISES THE STAKES
The bill gained momentum after U.S. securities regulators sued Goldman Sachs Group Inc on April 16, charging the investment bank with fraud in marketing a product linked to subprime mortgages, the risky loans at the heart of the financial crisis.
Finance ministers from the G20 group of leading nations met on Friday in Washington, D.C., and recommitted themselves to improving bank capital rules and discouraging excessive leverage.
The sharpest division was over an International Monetary Fund proposal to levy taxes on banks so that taxpayers would not foot the bill for costly bailouts. Britain and the United States have pushed for such policies, while Canada has been the most vocal opponent.
Canadian Finance Minister Jim Flaherty said he thought sentiment was swinging toward his country's position.
Obama has already proposed a levy to recoup $90 billion of public money used to shore up banks in the 2007-2009 crisis.
I'm still skeptical about the future of the bank tax. The SEC's Goldman announcement certainly increases the public's anger with Wall Street but I think Congress, especially the Senate, is still leery of a bank tax, said policy analyst Brian Gardner at investment firm Keefe Bruyette & Woods.
(Reporting by Kevin Drawbaugh; Editing by Tim Dobbyn and Jan Paschal)
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