Diplomacy is the art to hold its positions without too much to have the air. At the United Nations, Barack Obama yesterday called his partners to take their responsibilities without waiting for that "America any resolve only the problems of the world".But, on three major issues in the agenda (control bonus, building of own funds and accounting standards), Washington will have any fact to keep control of work and calendar of the G20. With the offensive concerted Europeans in the field of the bonus, the administration Obama is is cleverly "discarded" on the reserve, now ready to speed up its proposals on the regulation of the remuneration, focusing instead on the strengthening of own funds banks and reduction of their leverage effect.
"No mistake: defects of our financial system and our regulatory framework, which have allowed this crisis to hatch and somehow are at the origin, are still in place", acknowledged yesterday the Secretary of the Treasury Timothy Geithner. "We can disagree on the details, but this does not mean that we must not act," he added before the House financial services Committee.
A culture of risk review
In setting, as early as September 3, the "principles of reform of the United States and international framework" for the strengthening of the reserves of banks, the Treasury clearly intended to give the tempo of the priorities of the g-20. For Washington, the bonus issue is secondary to that of the strengthening of the propres funds. "A lesson of the recent crisis is that the need for banks of avoir equity stronger and higher is absolutely essential", insists the Treasury.
"There have been a short term culture which used debt to take exorbitant unbearable risks for the whole system." "It is this culture that must be questioned," insisted Barack Obama in an interview with Bloomberg, September 14. While committing formally to what the United States adhere to the timetable for Basel II from 2011, the Treasury has presented a proposal in 8 points which is significantly more severe. In arguing for tougher standards on own funds and thus a reduction of the "leverage effect" banks (the relationship between debt and equity), the US Treasury is even ready to accept a reduction in the profitability of the banking sector. According to a recent study of JPMorgan Chase, a such strengthening could significantly reduce the profitability of Goldman Sachs, Barclays or Deutsche Bank, by cutting from 25 to 30 margins of some European banks. Still should be that Washington and the Europeans are agreed on the concept of "own merits", "the leverage ratio is a little biased and blind", as noted a European diplomat in recalling that half of the Tier-1 of Citigroup is composed of "hybrid debt."
Standards accounting and bonus
Same problems on the revision of accounting standards: while Christine Lagarde has claimed so far here a reduction in the scope of the "fair value" (value of the assets at market price) with a view to make it less "procyclical" accounting rules, the FASB (Financial Accounting Standards Board) argues for its extension. But the Europeans want to keep control of accounting standards to avoid the us call for strengthening of own funds that would penalize their banks.
On mentoring of bonuses, while encouraging the EDF to strengthen its control over the wages of the traders, Washington has not hidden his opposition to caps or specific limitations. Treasury weighs rather for proposals of compromise for a stretch and a limitation of the bonus on the control of the propres funds by supervisors.
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