US Largely Going It Alone on Regulatory Reform

By Joe Adler

When it comes to financial reform, the gap between the U.S. and other countries appears to be widening.That was the takeaway from a conference of international bankers here on Monday, with one attendee, speaking of the treatment of “too big to fail” institutions, calling the gulf a “Grand Canyon.” In many respects, the Dodd-Frank Act catapulted the U.S. way ahead of the pack in overhauling regulation following the 2008 crisis, including swaps oversight, a facility for resolving failing firms and a ban on banks’ proprietary trading. But participants at the Institute of International Bankers meeting raised questions about whether the global overhaul can work without nations speaking with one voice. Karen Shaw Petrou, managing partner at Federal Financial Analytics Inc., suggested that despite the rigorous efforts to harmonize rules — including multiple accords to coordinate capital requirements through the Basel committee — regulation was still to largely every country for itself. “When I look behind global pronouncements to analyze national implementation, high-minded standards all too often break down into divergent requirements loosely grouped under the moniker ‘Basel III,’ doing more to confuse than reform financial markets,” Petrou said. “Is this because nation-states just can’t play nice or is it, rather, that banking is, for all its cross-border operations, still at heart a home-country affair?”