In an interview with The Sunday Times, the Chancellor said he saw serious shortcomings in the American approach. Darling believes Obama’s proposals would not have prevented the crisis and risk undermining the international consensus on reforming the financial system.
Alistair Darling said that President Obama’s proposals for shaking up the banks would not have prevented the crisis and risk undermining the international consensus on reforming the financial system.
In an interview with The Sunday Times, the Chancellor he said he saw serious shortcomings in the American approach.
“It is always difficult to say ex ante that you would never intervene to save a particular sort of bank,” he said. “In Lehman, for example, there wasn’t a single retail deposit, but the then American administration allowed it to go down and that brought the rest of the system down on the back of it.
“You could end up dividing institutions and making them separate legal entities but that isn’t the point. The point is the connectivity between them in relation to their financial transactions”.
“Equally, the large-small thing doesn’t run. Northern Rock was very small in global terms but systemically it was quite important when it got into trouble.”
The Chancellor said Britain would continue to work with America on financial reform, but that any proposals would have to be “workable and deliverable” and that he would not do anything to “disadvantage London relative to the rest of the world”.
Darling’s big worry is that Obama’s bombshell proposals, based on ideas set out last year by Paul Volcker, former Chairman of the Federal Reserve Board, will shatter the consensus within the G20 nations on banking reform.
“If everyone does their own thing it will achieve absolutely nothing. The banks are global — they are quite capable of organising themselves in such a way that if the regime is difficult in one country they will go to another one, and that doesn’t do anyone any good.”
Lord Myners, speaking at a financial service seminar, said that “work is being done at national and international levels to reduce the probability of failure. Numerous innovative ideas including contingent capital and systemic risk levies have recently emerged to increase the resilience of the financial system globally and to ensure that the costs of any future failures primarily fall to banks and bank investors rather than taxpayers.”
© The Times
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