Europe Divided Over U.S. Bank Proposal, Seeks Global Pact

[Devodiere]

[QUOTE="Wall Street Journal"]LONDON—European governments on Friday gave a mixed reaction to American President Barack Obama's initiative to restrict the activities of big U.S. banks, calling for an international agreement before they will commit to the same course.

Mr. Obama on Thursday outlined a plan to prevent commercial banks and institutions that own banks from operating and investing in hedge funds and private-equity firms, while capping trading activity done for in-house accounts.

The move appears to be setting a barrier between commercial and investment banking, similar to the Depression-era Glass-Steagall Act that separated investment and commercial banking. That separation was repealed in 1999.

In Europe, major banks have traditionally adhered to the one-stop-banking, or "universal bank," concept of bundling traditional commercial banking with investment banking and other financial services under one roof.

Changing this, European governments believe, makes an internationally binding agreement the only alternative to prevent competing banking policies between banking centers. London, for example, would be at a competitive disadvantage to Frankfurt or Zurich if the U.K. government followed the U.S. lead but the German and Swiss authorities didn't.

In the U.K., whose finance-heavy economy was one of the biggest casualties of the credit crunch, the Labour government has backed off from any separation of risk in large banks or caps on size.

Paul Myners, the U.K. Treasury's financial services minister, said Friday that the U.K. government won't be following the U.S. plan to reform banking.

"We're not going to separate investment banks from universal banks, retail banks," he said in an interview on BBC. The current government's approach is to require much more capital to be required by the riskier parts of the bank and to put a firewall in place that ensures that those parts of the bank can never put at risk the whole bank or the system, he said. [/QUOTE]

[URL="http://online.wsj.com/article/SB10001424052748704509704575018622712047044.html?mod=WSJ-Markets-LEFTTopNews"]Full Article here[/URL]

I can see why they would want to bring this in and why they would prefer a global agreement, but the doubt that this could affect their banks profitability will probably stop most countries from passing it. I'm not sure the changes won't cause more harm than good anyway.

[radioactive]

Just do what Roosevelt did in 1933.

[codenamecueball]

They should do it.
We don't want another meltdown.

But then again, we want return on our money

[Lankist]

Wait I don't understand does Europe give a shit about potential loss of profits?