BL: European Union Finance Chiefs to Resist Obama's Plans for Banking Overhaul
By Meera Louis and Jurjen van de Pol
Feb. 15 (Bloomberg) -- European Union finance ministers are uniting to oppose President Barack Obama’s proposal to limit banks’ size and risk-taking, saying his plan may run counter to EU policy, according to a draft document.
Their position, which they will ratify at a two-day meeting starting today, comes after Obama last month urged the adoption of the so-called “Volcker rule,” named for former Federal Reserve Chairman Paul Volcker. The plan would bar commercial banks from owning hedge funds and limit how much they can trade for their own account.
The finance officials gathering in Brussels will express “their concern that the application of the ‘Volcker’ rule in the EU may not be consistent with the current principles of the internal market and universal banking,” the document obtained by Bloomberg News said. “Any policy choice should avoid pushing risks to other parts of the financial system.”
The resistance underscores political divisions over how to overhaul banking regulations to prevent a repeat of the crisis that forced taxpayers to prop up the financial system. While leaders have called for a Group of 20 initiative, the U.S., Britain, and France are forging their own policies to limit compensation and risks.
At a meeting this month in Canada, Group of Seven finance ministers signaled they are rallying around a plan to introduce a levy on banks if it can be applied worldwide.
The Feb. 10 draft, entitled “Issues note on the most recent proposals of the U.S. administration in respect of Systemically Important Financial Institutions and the introduction of a financial crisis responsibility fee,” was prepared by a committee of officials from finance ministries, the European Central Bank and the European Commission.
EU Proposals
The three-page memo also considered proposals including levying a stability fee on banks and creating national or pan- European funds for future bailouts.
Swedish Finance Minister Anders Borg last month presented a plan to create a fund for future banking crises. In contrast, the Netherlands’ Wouter Bos last month wrote a letter to his counterparts welcoming Obama’s proposals and calling for a “serious debate” on the U.S. plan at the meeting in Brussels.
Jean-Claude Juncker, who heads the group of euro-area finance ministers, last month voiced concern about a common approach on bank levies given that taxes are a matter dealt with at the national level of the 27-member bloc.
To contact the reporters on this story: Meera Louis in Brussels at mlouis1@bloomberg.net; Jurjen van de Pol in Amsterdam at jvandepol@bloomberg.net
Last Updated: February 14, 2010 18:00 EST
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