“We banks are trying to cooperate over the unintended consequences of recent regulatory pronouncements. In the US, banks tended to go underground rather than go to Washington to talk about the unintended consequences of the Dodd-Frank bill,” said Karen Peetz, vice chairman and CEO, financial markets and treasury services, BNY Mellon.
“But I am quite hopeful about the cooperation now taking place within the industry for articulating our concerns to the regulators. The regulators have been quite responsive and I think dialogue is the answer.”
Karen Fawcett, senior managing director and group head of transaction banking, Standard Chartered Bank, said that the higher cost of offering trade finance services would have a significant impact economic activity. “If the regulations are implemented as they are currently written, we could be seeing a 2% fall in global trade and a 0.5% fall in global GDP,” she said.
“Those are big numbers. But recent data from the International Chambers of Commerce show that there have been problems with misjudging the capital requirements for 30 years, not just the last three or four. So we need to have a bigger conversation about how these products are treated.”
Speaking after the debate, Donna Alexander, CEO of BAFTIFSA, a body established to coordinate the banking industry’s dialogue with regulators and policy- makers, confirmed that discussions over capital requirements were ongoing. “In everyone’s estimation, recovery is most likely to come from the small-to-medium enterprise sector and the emerging markets, both of which have a relatively heavier reliance on letters of credit,” she said. “If capital requirements on trade finance services are costly for the banks, they are going to have to raise prices, which will have a knock-on effect on SMEs and firms trading in the emerging markets. If we unintentionally hamper the vehicles for recovery, then we shoot ourselves in the foot.”
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