FRANKFURT — Two years ago, Jamie Dimon, chief executive of JPMorgan Chase, told an audience in Davos that people should stop picking on bankers. Mr. Dimon is still waiting for his wish to come true.
Bankers, always a big presence at the World Economic Forum in the Swiss city of Davos, arrive this year under less regulatory pressure and with better profits than in past years. But they are still on the defensive.
Mr. Dimon, scheduled to appear on one of the first panels when the Davos forum opens Wednesday, is again embroiled in controversy. Last week JPMorgan’s board cut his pay for 2012 in half, to $11.5 million, holding him accountable for a multibillion dollar loss in derivatives trading.
International bankers are under fire from the law enforcement authorities as well, and one does not have to go far from Davos to find examples.
UBS, based in Zurich, agreed to pay a $1.5 billion fine to the global authorities after admitting this month that it had helped manipulate a key benchmark rate used to set mortgage and other interest rates. Wegelin, a private bank based in St. Gallen, Switzerland, shut down earlier this month after admitting it had helped wealthy Americans evade taxes. The bank, founded in 1741, was the oldest in Switzerland.
And at a news conference last week in Washington, the managing director of the International Monetary Fund, Christine Lagarde, lamented a “waning commitment” to tougher financial regulation and called upon the banking authorities to finish the job of fixing the world’s banks.
For all that, though, bankers may find the atmosphere in Davos a bit more congenial than in some recent years. Among the government overseers who will also be flocking to the Swiss town, there seems to be a growing feeling that the banks have taken enough bashing.
Earlier this month, for instance, an international conclave of central bankers and bank supervisors, meeting in Basel, Switzerland, relaxed new rules that were intended to ensure that banks would be able to survive an event like the collapse of Lehman Brothers in 2008.
The rules, which are not binding but serve as a benchmark for national regulators, would require banks to maintain a 30-day supply of cash or liquid assets that are easy to convert into cash. But after the decision in Basel this month banks would have until 2019 to accumulate the additional cash and assets, instead of 2015. The regulators also broadened the kinds of assets that qualify, so that now they can include even some mortgage-backed securities—the same general class of security that was at the heart of the crisis.
Many analysts see the decision as a gift to the banking industry, which had insisted that planned new regulations will force them to curtail lending. Bank stocks in Europe rose after the decision.
“Most bankers I talked to breathed a huge sigh of relief,” said Cornelius Hurley, a professor at the Boston University School of Law and former counsel to the U.S. Federal Reserve board of governors.
Gavan Nolan, a credit analyst at Markit, a data provider in London, agreed that changes in the rules “went further than many had presumed, and in a direction that seems to favor the banks.” Still, in a note to clients he added, “the effects shouldn’t be overstated.” The rules “will still make it more difficult to make money, in comparison to the previous era.”
The discussions at Davos may offer clues about whether the Basel decisions foreshadow other concessions..
There is a risk that efforts to rein in financial risk could lose momentum as the Lehman trauma fades, Mr. Hurley said.
“We said to ourselves back in 2008, a crisis is a terrible thing to waste,” he said. “It seems the farther away we get the evidence is that we are wasting it.”
The World Economic Forum tends to be a place for talk rather than action, but it is one of the few events that reliably brings central bankers, regulators, economists, legislators and bankers under one snow-laden roof.
The discussions sometimes have been contentious, as in 2010 when U.S. policy makers like Representative Barney Frank met behind closed doors with top bankers including Brian T. Moynihan, then the chief executive of Bank of America.
Article source: http://www.nytimes.com/2013/01/21/business/global/21iht-davosbanks21.html?partner=rss&emc=rss
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