U.S. President Barack ObamaMANDEL NGAN
Here is some reaction from around the world to U.S. President Barack Obama's proposals to limit financial risk taking.
DUTCH FINANCE MINISTRY SPOKESWOMAN:
Said the ministry supported the "general aim" of Mr. Obama's "ambitious" proposals but cast doubt on whether they would be possible to implement.
"In general, we think that it will be difficult to regulate the market and exclude or separate activities or institutions."
"We think it is more important to set incentives right (adequate capital standards, prudent compensation schemes) to prevent risks from emerging."
FRENCH ECONOMY MINISTER CHRISTINE LAGARDE:
"I think this is a very, very good step forward," Ms. Lagarde told Europe 1 radio station.
Asked if France should imitate the move, she said: "Actually it is more the opposite that is happening ... I am delighted that president of the United States is following our lead."
"They see that regulation, which was a taboo word that was difficult to use in financial circles in the United States, is vital to contain and limit banking excesses."
BRITISH OPPOSITION CONSERVATIVE FINANCE SPOKESMAN GEORGE OSBORNE:
"President (Barack) Obama has created a lot of space for the rest of the world to come up with what I think would be a sensible system of international rules and agreements that creates a strong and competitive City of London but also a safely regulated one," Mr. Osborne told BBC Radio 4.
"I don't want to do things that unilaterally damage the City of London, or unilaterally damage British banks."
"If we need new rules they should be agreed internationally and I think the G20 meeting in South Korea in a few months time is a good place to try and map out those rules."
"There are plenty of investment banking activities that are serving the needs of customers and clients."
"It's the riskiest end of investment banking, it's when they are making huge bets with the bank's own money and the bank's balance sheet that I think we need to separate from retail banking."
NOMURA STRATEGIST CHARLES DIEBEL:
"The witch hunt against the banks continues and while that may be justified in terms of lowering risk, it's not good for P&L and restricts the level of economic activity so it's good for bonds."
SIMON MAUGHAN, ANALYST AT MF GLOBAL:
"The biggest risk is that we're under a cloud of uncertainty all the way through to the U.S. midterm elections, which is effectively for the whole year."
COMMERZBANK ANALYSTS' NOTE:
"Measures of this nature would limit the liquidity of the U.S. financial markets, thus affecting the attractiveness of the dollar for investors."
"We should really question why the plans have not put more pressure on the dollar - the reason is probably the uncertainty surrounding the actual implementation of such measures."
GERHARD SCHWARZ, HEAD OF GLOBAL EQUITY STRATEGY AT UNICREDIT IN MUNICH:
"We have to digest that the reception in the last trading session in the U.S. to the Obama plan was very negative in the financial space and this has provoked some risk aversion across the board."
B OF A MERRILL LYNCH ANALYSTS' NOTE:
"Given the lack of clarity over whether those proposals will be implemented, and if so, in what form and over what time-frame, we see risks that uncertainty will hang over the market structure stocks," they say.
"What is clear to us is that there will be more noise on this front between now and November as U.S. politicians lobby for popular support ahead of midterm elections."
MICHAEL McKEE, FINANCIAL LAWYER, DLA PIPER:
"It puts Europe in a crossroads situation. They have a choice to make. There will be those, particularly on the left, will be quite supportive but Europe has more to lose. The universal bank model is more prevalent in Europe and European markets have a greater need for the liquidity that flows from the universal bank model because our equity markets are less deep. In one sense it need not derail many of the things agreed at the G20 but it does alter the dynamic. The proposals were to some degree premised that most institutions would be operating a universal bank model but it does not necessarily alter what you do in capital changes as many are focused on the trading book. I don't think it has a major impact on capital side of the proposals or on remuneration. It might mean most of the G20 proposals can still work even if you have a Glass-Steagall type approach," he said, referring to the Depression-era U.S. law that separated retail and investment banks.
SIMON GLEESON, FINANCIAL LAWYER, CLIFFORD CHANCE:
"The proposed changes don't make much sense as pure regulatory proposals - if the financial system as a whole gets into trouble you have to rescue it whether it consists of ten big banks or a hundred small ones.
"It's a bank's holdings in hedge funds and PE funds which have provided much-needed stability when the value of other assets was swinging around like a flag in a gale.
"Europe is already heading towards a separation of commercial and investment banking through the Basel/Capital Requirements Directive process. However the big question is whether we will get away with a separation within groups, that is we restructure European banks into a commercial subsidiary and an investment bank subsidiary, similar to the existing U.S. model, or whether it will be necessary to break bank groups up completely into deposit-taking commercial lenders and "merchant banks" - this is my "back to the future" argument.
Obama seems to want to go all the way towards a complete break-up, and this move must make it more likely that Europe and the G20 will follow this line."
HELVEA BANKING ANALYST PETER THORNE:
"The really interesting thing is what Europe is going to do, and I can only think they will copy Obama."
"These measures are not going to be restricted to the U.S., the anger that Obama and others have expressed is reflected in Europe."
NOMURA ANALYST RAUL SINHA:
"New regulations are being proposed thick and fast and the industry faces major uncertainty from these."
SIMON WILLIS, ANALYST AT NCB STOCKBROKERS:
"Obama's proposals are a return to Glass-Steagall in all but name."