One of the worlds largest cross-border banks has
warned financial regulators not to rush into setting new rules
on capital requirements while the economic recovery is still in
Mike Rees, CEO of wholesale banking at Standard Chartered,
said that leaders of the G20 group of rich countries had
adopted a schizophrenic attitude towards big
There is a schizophrenia between getting the economy
going and public perception [of the banks] and that is causing
problems, he told Emerging Markets in an
interview on the fringes of the IMF Annual Meetings.
Who knows where the debate will go. A recession is the
wrong time to impose big capital requirements. If you are going
to lift them, you should it in the good times.
Although the G20 has named 2012 as the deadline for
implementing the improvements in the quantity and quality of
bank capital and reducing leverage, Rees said banks would have
to start working on implementation now.
The markets will be looking at the banks today,
he said. 2012 means we have to do it today, because the
refinancing cannot take forever. The reality is that we have
got to get it right today.
Changes to the rules on leverage would have a major
impact on the amount that banks could lend out, Rees said.
You have to wonder if governments would be better
supporting banks with lower capital adequacy and stimulating
lending, rather than [debating] the appropriate level of
He also cast doubt on the relevance of living
wills documents that cross-border banks may have
to draw up to help the authorities in the case of a Lehman
Rees said effort would be better spent on ensuring that
global supervision was improved. It has got confused
about what it is trying to achieve, he said, describing
living wills as simply overseeing the death rites
of a bank.
What needs to come out is how regulators co-ordinate
... on identifying early signs of the problems and co-ordinate
so that it gets there [collapse]. Coordinating the regulators
is more significant.
Standard Chartered, which generates the vast majority of its
revenues in Asia, Africa and the Middle East, has put in place
many of the recommendations for financial regulation, after the
Asian crisis of 1997.
Standard Chartered is one of the relative winners from
the financial crisis. Over the first six months of 2009, income
was up 14% year-on-year and pre-tax operating profits rose 10%.
But Rees warned the economic recovery was still fragile.
We are cautious about the world at the
He played down hopes of a sustainable recovery in trade
finance. The economy is becoming increasingly globalized
but the finance sector is becoming increasingly
nationalised, he said.
Rees said governments had been keen for domestic banks to
support the local economy. One of the problems is that
there has been a real constraint on trade finance, he
said. International companies worry about how they can