–Narrowing Differences W/Europe On Capital, Liquidity Requirements
By Brai Odion-Esene
WASHINGTON (MNI) – There is no universal support for the United
State’s proposal to impose a levy on large banks among the G20 and that
will not change at the upcoming meeting in Busan, South Korea, U.S.
Treasury Secretary Timothy Geithner said Wednesday.
He does believe that differences between Europe and the U.S. over
imposing higher capital and liquidity requirements on international
banks is “narrowing.”
In a briefing with reporters before departing for Asia, Geithner
was asked how close the G20 is to reaching an agreement on implementing
a bank tax.
“I don’t think we are on the verge of a global consensus on the
bank levy yet,” he said, although there is broad support in the UK and
continental Europe for a financial fee similar to the U.S. proposal.
There will also be no agreement this weekend on what new capital
and liquidity standards should be imposed on global financial
institutions, the Treasury Secretary said.
But, “I do think the differences (between the U.S. and Europe) are
narrowing,” Geithner declared.
On the issue of Europe conducting stress tests to assess the
capital positions of its banks, Geithner said there is a very good case
for bringing more transparency and disclosure to the major institutions.
“I think there is broad support in Europe for doing that,” he said,
warning “uncertainty has a price, and you can reduce uncertainty if you
improve transparency and disclosure.”
The market, he said, needs enough information that it can make
better informed decisions and assess the relative strength of
institutions.
Geithner refused to comment about the recent woes of the euro and
yen and the resulting impact that has had on the dollar.
The G20 has proven to be really remarkably effective at summoning
collective will to meet common challenges, Geithner said, something the
group wants to build on.
This weekend’s meeting of G20 finance ministers Geithner said, is
designed to shape agreement for leaders meeting in Toronto June 26-27.
“You should look at this meeting ahead as preparatory.”
Geithner noted last year, the G20 came up with a plan to slow the
momentum of the financial crisis and agree on a framework for fixing the
global financial system. That basic plan has been “remarkably
effective,” he said, particularly in the U.S. where growth has been
restored.
He added that the world — because of the effectiveness of that
strategy — came into the current period of concern about Europe with
“stronger underlying momentum for recovery than many people expected.”
He said the U.S. has two agendas at the meeting, one related to
growth and the other to financial reform.
It is important that nations commit to reinforcing, strengthening
and safeguarding the global recovery, he said. G20 nations must have in
place longer-term reforms that will raise growth rates in the future,
although Geithner acknowledge that G20 nations face different mix of
challenges.
The G20 must reaffirm its committment to the “global rebalancing”
agenda, Geithner said, with future growth coming from domestic demand in
countries outside the U.S.
The body must also reaffirm its determination to put in place
fiscal reform plans that will restore fiscal sustainability over the
medium-term. Those fiscal reforms must happen in a way that is “growth
friendly,” he said.
Asked by Market News International how exactly nations can
implement growth-friendly fiscal policies and still cut large deficits,
Geithner noted there are different imperatives across countries — with
some in a strong positions, and others needing to move much more
quickly.
“You want to make sure that you are helping growth, and you want to
make sure that you design those plans in a way that you are providing
better incentives for things that are helpful for long-term growth
prospects.”
The pace and timing is going to differ across countries, he said.
On financial reform, Geithner repeated the stance adopted by the
Obama administrations, calling for global agreement on the core reforms.
This includes greater transparency and disclosure to the financial
system, a consistent global framework on derivatives markets, and to put
in place a new agreement on capital leverage/liquidity requirements on
the major global financial institutions.
“Those are our basic priorities and objectives,” Geithner said.
Geithner told reporters that it is reasonable to use a transition
period to make it easier for countries to adjust to what should be more
demanding and ambitious constraints on leverage, stating his willingness
to do anything to make those countries “more comfortable” with the new
standards.
Commenting on the ongoing credit crisis in Europe, Geithner said
the Europeans “have laid out a very strong, very comprehensive program
of policy reforms and financial support” to help countries manage
through tensions and pressures.
“They’ve made it clear they have the political will to provide that
… financial support,” he said.
Geithner also gave his opinion on the breakdown of negotiations
between U.S. insurance giant AIG and British financial service firm
Prudential plc, over the sale of AIG’s Asian subsidiary AIA.
“I think AIG is now free to pursue a bunch of other options to help
maximize the return — and reduce any risk of loss — to the taxpayer,”
he said. “I wouldn’t view this as a setback.”
** Market News International Washington Bureau: 202-371-2121 **
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