Michel Barnier, the European Union’s financial services chief, said a Mitt Romney victory in today’s election risks banking regulation taking a step “backwards.”
The U.S. shouldn’t retreat from overhauling regulations for its finance industry should the Republican candidate prevail over President Barack Obama, Barnier said in an interview with Bloomberg Television.
“What worries me in the Republican program is the temptation to go backwards by not implementing all the new regulations decided by the G-20 -- which are really lessons from a financial crisis that started in the U.S.,” Barnier said, referring to the Group of 20 nations. “We cannot go backwards.”
The U.S. and EU have both embarked on a legislative program in the wake of the 2008 financial crisis, based on agreements by the G-20. The U.S. efforts center on the 2010 Dodd-Frank act, while the EU has started a broadly similar legislative program involving more than 30 draft laws.
“I hope that the new U.S. administration will stay on the same line as what the Obama administration did with the Dodd- Frank act,” Barnier said.
The EU supports rules enshrined in the Dodd-Frank act, Barnier said. There is a need for trans-Atlantic co-operation within the G-20 to push ahead with financial regulation, he said.
Amanda Henneberg, a spokeswoman for the Romney campaign, didn’t immediately return an e-mail seeking comment.
While Obama has said that Dodd-Frank should be implemented in full, Romney has called for it to be repealed and replaced. He has pledged to “take a weed whacker” to government regulations, saying that they stymie economic growth.
The 1,000-plus pages of Dodd-Frank legislation revamped the U.S. system for overseeing financial institutions, established a Financial Stability Oversight Council to tackle systemic risks and regulated trading in over-the-counter derivatives. The law also forces banks to boost their capital reserves.
Electing the Republican candidate would be positive for banks because regulatory reforms and supervision would be more “balanced,” Credit Suisse Group AG analysts wrote in a note last month.
A win for Romney is more likely to boost Wall Street compensation than if voters re-elect Obama, according to a survey conducted by eFinancialCareers.
Separately, Barnier said that the EU was working on plans to toughen regulation of banker bonuses. Legislators are seeking a compromise on calls from the European Parliament for a ban on bonuses that exceed fixed pay, he said.
“We need more moderation and more transparency” on bankers pay, Barnier said. “We are looking for a compromise which would be even better at limiting bonuses and the largest pay awards.”
Barnier also said that he plans next year to present “legislative proposals” on the structure of banks.
The measures will follow up recommendations made by an EU- mandated expert group led by European Central Bank Governing Council member Erkki Liikanen, Barnier said.
The so-called Liikanen group proposed last month that banks should be forced to push much of their trading activities into separately capitalized units, in a bid to end taxpayer bail-outs of failing lenders.
“I can’t prejudge the outcome of the work that we’re doing at the moment,” Barnier said. The Liikanen report is a “good basis for the work of the commission.”
To contact the reporters on this story: Jim Brunsden in Brussels at firstname.lastname@example.org; Caroline Connan in London at email@example.com
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