The elegant French woman with the smooth manners of a veteran cabinet minister doesn't conform to common stereotypes of a tough law enforcer. But International Monetary Fund managing director Christine Lagarde is pushing for firmer financial regulation around the world.
At a news conference in Washington on the eve of the World Economic Forum, the chummy annual gathering of the world's business elites, Ms. Lagarde decried the "waning commitment" to tighter financial regulations. Finishing the post-2008 effort to fix the world's banks should be one of three economic priorities in 2013, she said.
"We believe that it is important for regulators, for supervisors, for authorities to resist aggressive industry push-back," she said.
She elaborated on the theme in an interview later, warning that robust lobbying threatens to weaken efforts by regulators and legislators to force banks to hold more and better capital against their loans and to be more transparent.
"I see a lot of pressure coming out of the industry," said Ms. Lagarde, a former corporate lawyer. She is not naive about that muscular lobbying, or unsympathetic to its motivations; it is, she said, "clearly part of their jobs. They will naturally lobby to support more flexible, more accommodating regulations."
But because of the special role of finance in the economy – including the special support governments give banks in times of trouble – the "sector warrants stronger regulation, and stronger buffers against potential risks and regular tests of their capacity to resist shocks."
She was quick to rebuff some of the bankers' arguments against stronger financial regulation. When I asked her whether the weak world economy is a reason to delay tougher rules, she was uncompromising: "It's always the wrong time here."
She was equally firm when I ventured the complaint of some U.S. banks that the contested Basel III regulations that set rules for banks around the world were anti-American and placed an unfair burden on U.S. companies.
"When I was sitting on the other side of the pond, I heard exactly the same story from the European banks, that it was anti-European and overly pro-American," Ms. Lagarde said. "So I'm sure there must be something right about it. I think the Basel committee is trying to do as good a job as it can and is trying to resist the pressure."
It is just a little more than four years since a financial crisis ripped apart the world economy, destroying millions of jobs and stunting millions of lives. Those wounds are still so fresh that you may be surprised to learn that banks, whose risky behaviour caused the crash, would be putting up much of a fight at all against tighter rules.
"It's human nature," she told me. "The moment the situation improves, you tend to forget about the hard times. … It is the job of policy makers, of supervisors, of regulators to constantly have that in the back of their mind and as an objective to avoid a relapse of what happened back in 2008."
The major current battle is about capital – how much banks should hold and how liquid it should be. Ms. Lagarde sees two other big fights in the offing.
One is the regulation of so-called shadow banking, the vast world of financial transactions that are done outside open exchanges, hidden from public balance sheets or conducted by non-bank financial institutions. "Shadow banking is clearly developing at a steady pace," Ms. Lagarde warned in our interview, and "currently escapes a degree of regulation and supervision."
Her second worry is what she called "forum shopping" or "fragmentation." This is the Gérard Depardieu story on an institutional level. Just as today's globalized world allows the French actor to cross borders and trade passports to escape high French taxes, global financial institutions can "shop" for the national home base that provides the lightest regulation. While that may be good for bankers, it is dangerous for the world economy.
This distinction between what is in the interest of the banks and what is in the public interest was at the heart of Ms. Lagarde's comments.
Ms. Lagarde runs the world's most important public global financial institution. When most people think of the IMF at all, it is usually as the stern enforcer of the sometimes harsh rules of international capitalism. That's why we should take her call for tougher financial regulation seriously.