A closed-door meeting of dozens of financial sector heavyweights on the sidelines of the World Economic Forum made some progress on bank capital and liquidity requirements, and legal structures, participants said.
But the bankers and regulators skirted the issue of a global insurance levy to make sure that banks — not taxpayers — pay for future mistakes, and no firm agreements were reached.
Larry Summers, top economic adviser to US President Barack Obama, who is under fire from Wall Street over his plans to curb big banks, said the “vigorous, constructive discussion” had raised the level of understanding.
Financial Stability Board chief Mario Draghi said global regulators were working on proposals for a central agency to manage bank failures, and mulling ideas for capital surcharges or contingent capital for institutions deemed too big to fail.
“We want to have an authority or an agency which has the power, the funds, the budget and the competence to manage failure in an orderly way,” he told Reuters Insider television.
But other participants were sceptical of any cross-border body that would impinge on national sovereignty.
US Congressman Barney Frank, piloting tough legislation to regulate Wall Street, said after the talks: “No one got up and said don’t regulate us. They would be wasting their time if they did. They all understand regulation is coming.”
In a panel discussion on the world economy, Summers and International Monetary Fund chief Dominique Strauss-Kahn said growth was returning faster than expected but a better balance was needed between exporting and importing nations.
Summers also highlighted the high toll in unemployment, saying: “What we are seeing in the US is a statistical recovery and a human recession.”
China’s deputy central bank head, Zhu Min, told delegates the emerging economic powerhouse was working to achieve more balanced growth and boost private consumption this year, but the switch from exports to domestic demand would take time.
Trade ministers from major economies, meeting on the sidelines of the annual Davos conference, voiced gloom about prospects of a global trade liberalisation deal this year and many blamed the United States for foot-dragging. Washington sent only a deputy ambassador to the informal talks.
British finance minister Alistair Darling told Reuters after the talks with bankers: “Firstly we are agreed that whatever we do, it needs to be universal.”
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