Aggregate Impact of Basel, Other Global Reform Measures Could Stifle Economic Growth, Job Creation, GFMA Says

Release Date: 3 June 2010 

Contact: 

SIFMA/ASIFMA-Andrew DeSouza, (202) 962-7390, adesouza@sifma.org 

AFME-Rob McIvor, +44 (0)22 7743 9312, rob.mcivor@afme.eu 

Aggregate Impact of Basel, Other Global Reform Measures Could Stifle Economic Growth, Job Creation, GFMA Says 

 3 June 2010 — The Global Financial Markets Association (GFMA) issued the following statement today on global financial regulatory reform ahead of the June 4-5 meeting of G20 Finance Ministers:

“GFMA welcomes the continued measures that governments and industry have taken in building a framework for a more robust financial system. As these measures are being developed and refined, we call on governments to assess the cumulative impact of these regulations on the financial markets, and the corresponding impact these changes will have on global economic growth and job creation. We believe that these changes – increasingly fragmented – are likely to have a negative impact on both the financial system and the hundreds of millions of people and businesses that it serves,” said Chief Executive Officer, Tim Ryan.

“Importantly, we are concerned over possible hasty implementation of the Basel capital proposals which would reduce the ability of the industry to provide capital to businesses and consumers to support economic growth. Finalizing the proposed revisions to the Basel Accord by the end of this year without providing additional time to comment will not give enough time to assess their wider economic consequences and make any necessary changes,” noted Ryan.

“We are also concerned by proposals from the IMF and some individual countries to levy punitive taxes on the industry,” added Ryan. “At a time when the international community is looking to the financial sector to resume fully its role as the necessary component for economic growth and job creation, such a tax would be ill-conceived. This is particularly true in the current environment as governments seek to exit macroeconomic and financial support measures.”

GFMA applauds the G20 finance ministers for their work to support the regulatory and legislative reforms necessary to ensure a robust global financial system. It urges them to assess the aggregate impact on global economic growth of the numerous, frequently overlapping, initiatives being proposed before committing to implementation. As noted in the G20 statement following the St. Andrews meeting of finance ministers in November 2009, the International Monetary Fund (IMF) and Financial Stability Board (FSB) should provide assessments of the collective impact of these measures on the global economy and the financial system.

In addition, as countries accelerate the pace of regulatory and legislative reforms and encourage renewed, sustainable growth, it remains vital to seek a well-balanced and well-coordinated regulatory framework and guard against the potential for barriers to market entry, distortions to competition, or regulatory arbitrage. GFMA believes that the FSB’s Standing Committee for Standards Implementation – which is tasked with planning peer reviews of its members and is to report on members’ commitments and progress in implementing international financial standards and other initiatives – is well situated to monitor developments in these areas and to ensure coordination and cooperation among regulators.

Finally, the FSB’s expanded mandate and central role in promoting a better understanding of regulatory standards in international markets and facilitating the coordination of standards across different jurisdictions, means that the FSB will have a more direct impact on market participants. In this regard, GFMA welcomes the commitment to consultation in the FSB’s Charter. It is critical that the FSB provides, as part of the coordination procedures, for a thorough consultation with market participants on policy development, ensuring reasonable time for comment and discussion, and advances proposals that are well informed by impact analysis. GFMA stands committed to contributing to the FBS’s consultation process across the globe.

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GFMA joins together the common interests of hundreds of financial institutions across the globe. GFMA’s mission is to develop policies and strategies for global policy issues in the financial markets, thereby promoting coordinated advocacy efforts across its partner associations. GFMA is partnered with the Association for Financial Markets in Europe (AFME), the Asian Securities and Financial Markets Association (ASIFMA), and, in the United States, the Securities Industry and Financial Markets Association (SIFMA).