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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: Maurice Winn who wrote (72276)1/30/2010 1:49:10 PM
From: Haim R. Branisteanu  Read Replies (2) of 74559
 
DAVOS: ECB Trichet: Financial Regulation Must Be Global

(Adds details.)
By Geoffrey T. Smith
Of DOW JONES NEWSWIRES

DAVOS, Switzerland (Dow Jones)--The regulation of the banking sector must be coordinated globally, European Central Bank president Jean-Claude Trichet said Saturday.

"This has to be treated at the level of the global bodies that we have all created--the G20, the Basel Committee and the Financial Stability Board," Trichet told a panel discussion at the World Economic Forum annual summit here.

Trichet said that all efforts must in the first instance be targeted on preventing failure of banks that are systemically important either by virtue of their size, or their interconnectedness with the rest of the financial sector.

Trichet agreed with fellow panel-member, Bank of Israel governor Stanley Fischer, that it is of paramount importance to avoid a situation where banks can set up shop where regulation is most indulgent to them--a problem known as "regulatory arbitrage".

"If they can be arbitraged around, there's not much point in capital requirements," Fischer said.

Trichet said that the failure to create a set of rules that can be enforced globally "is a recipe for catastrophe because we will be back to the regulatory arbitrage we had before."
"We cannot afford a second crisis. I don't think either the emerging world or our own democracies will stand for it."

Summit Web site: www.weforum.org

-By Geoffrey T. Smith, Dow Jones Newswires (+49) 160 743 4090; geoffrey.smith@dowjones.com
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