Bankers bite back

International bankers joined forces on the opening day of the World Economic Forum in Davos to warn governments against proposals to limit their activities.

Moves to restrict banks to certain types of activities would do more harm than good, they said.

Several top bankers were present in the Swiss resort to fight what they fear will be over-regulation in the aftermath of the global financial crisis.

Barclays Bank President Bob Diamond said he has "seen no evidence that suggests that shrinking banks is the answer" to preventing a future meltdown.

"If you step back and say large is bad, and we move to narrow banking, the impact of that on banks and on global trade, the global economy, would be very negative," he said.

Standard Chartered CEO Peter Sands said there was a growing risk that fragmented regulatory initiatives would "create enormous amounts of complexity."

Other executives, including Deutsche Bank Chairman Josef Ackermann, the chairman of insurance market Lloyd's of London, Lord Levene, and JP MorganChase International Chairman Jacob Frenkel, agreed.

However, central bankers such as China's deputy central bank chief Zhu Min said there was no reason for the finance industry to chase overly high returns on equity. And Mexico's former top central banker, Guillermo Ortiz, made the point that banks in emerging markets had suffered substantially less than those in developed economies because they were subject to tighter regulation.

Break up of bad banks?

The debate was spaked by proposals from US President Barrack Obama's to break up banks that are deemed "too big to fail."

Obama shook up markets late last week with a proposal that would prevent commercial banks from owning and investing in hedge funds and private equity firms, and limit the trading they do for their own accounts. Banks should choose between these activities or traditional ones like making loans and collecting deposits, he said.

Obama's proposals were met with limited support within the European Union. Many experts have warned that getting a majority consensus among the participating members of the Group of 20 would be much more difficult.

The investor George Soros said that Obama's plans were "premature," as the banks were, he said, "not out of the woods yet." Soros did, however, criticize bankers for resisting reform to their industry, calling them "tone-deaf."

Economic confidence up

But it's not all doom and gloom in the Swiss ski village. Surveys put together in time for the annual conference showed global economic confidence on the rise following a deeply uncertain 2009. There's also a cautious return to job creation, especially in emerging markets.

The study, compiled by accountancy firm PricewaterhouseCooper, showed that this rising confidence has translated into a planned boost in recruitment, with nearly 40 percent of CEOs expecting to increase their headcount this year. That contrasts with 25 percent of CEOs planning job cuts over the next year.

However, according to a statement by PricewaterhouseCooper, the survey revealed striking differences in confidence levels among CEOs in emerging economies and those in developed nations.

In North America and Western Europe, for example, about 80 percent of CEOs said they were confident of growth in the next year. That compared with 91 percent in Latin America and in China/Hong Kong, and 97 percent in India.

mrm/Reuters/AP/dpa
Editor: Rob Turner