In Davos, bankers told new rules are coming

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DAVOS, Switzerland (AP) — Regulators from the world’s major developed countries told bankers far and wide in Davos on Saturday that greater regulation is on the way, a defensive move aimed at avoiding a repeat of last year’s financial meltdown that dragged most of the world into recession.

U.S. Rep. Barney Frank said a bank tax and other tough new measures would be introduced by the individual countries but in a coordinated way to prevent bankers from moving from one place to another to escape regulation.

“Lenin might have been able to put socialism in one country, but tough bank regulation in one country ain’t going to happen because we will lose people,” said Frank, a Massachusetts Democrat who heads the U.S. House Financial Services Committee, a key spot for any American decisions.

The measures have been criticized by banks and hedge funds, fearful that more and more regulation could have the unintended effect of halting what most agree is a nascent economic recovery around the globe.

Government regulators, finance ministers and central bankers from the U.S. and Europe laid out their financial reform plans during a two-hour meeting Saturday with bank executives at the World Economic Forum.

It came after days of tension at the Swiss Alpine resort over government plans for stricter controls on the financial industry to limit speculation and avoid a repeat of 2008.

The event was not on the forum’s official agenda, but quickly became the most significant development of the day. It also brought to mind some of Davos’ high-profile conflict-resolution efforts of past years, including a Greek-Turkey accord to avoid war in 1988, as well as meetings between South African President F. W. de Klerk and the recently freed Nelson Mandela, and between Israel’s then-Foreign Minister Shimon Peres and PLO Chairman Yasser Arafat.

Frank, who emerged from the closed-door meeting as its unofficial spokesman, rejected the notion that the Obama administration could sink the economy again with too many new controls on the banking industry.

“That’s nonsense,” Frank told reporters. “What we’re trying globally to recover from is a total lack of regulation.”

For the most part, some bankers conceded that the regulations — existing and proposed — remain a key component of putting the financial crisis in the past and, to an extent, keeping it from happening again.

“Well they’re absolutely part of the solution, and I must say that the dialogue between political leaders, regulators and bankers have become very, very constructive indeed,” said Josef Ackermann, chief executive of Deutsche Bank AG. “I think we all know something has to happen quickly to restore confidence in the system.”

Few details of what was discussed were made public, but Frank said there would be a bank tax imposed by individual countries, but in a coordinated manner.

“The financial industry understands tough regulation is coming and it can be done thoughtfully,” he said.

The head of Britain’s Financial Services Authority said the banks didn’t ask for anything at the talks.

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