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02 September 2013

Reuters: FSB's Carney warns G20 of risk of fragmented banking rules

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The world's banking system risks fragmentation that could hurt growth if countries cannot settle their differences over how to handle big banks that run into trouble, a top policymaker said on Monday

Mark Carney, chairman of the Financial Stability Board (FSB), without referring to individual countries, said he would stress the need for the G20 to cooperate. "The fragmentation of the international financial system that results from such nationally focused policies could reduce global growth by putting up barriers to the efficient allocation of capital and liquidity", Carney told a news conference.

"A core message from the FSB to the summit is that what the G20 does ultimately determines the openness of not just the global financial system but the global trading system", he said.

The European Union is annoyed with US plans to impose heavier capital requirements on foreign banks as a safeguard to keep its taxpayers off the hook if they get into trouble.

Britain has also been criticised for putting pressure on foreign banks to become fully fledged subsidiaries and thus required to hold a pot of capital and cash locally.

Carney said nationally focused policies could reduce global growth by hindering efficient allocation of capital and liquidity. "Reforms that strengthen the resilience of the national and global system can also prevent regulatory arbitrage, reduce contagion and reduce incentives to ring-fence national systems", Carney said.

He will try to persuade leaders to allow their regulators to sign agreements with counterparts in other countries so that when a bank is in trouble, there is a clear blueprint on how it will be handled to avoid uncertainty and taxpayer exposure.

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© Reuters

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