Obama to request overhaul of world's banks

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Lehman collapse: President Barack Obama to push banking overhaul - Telegraph


Lehman collapse: President Barack Obama to push banking overhaul
President Barack Obama is to call for a series of sweeping regulatory changes to the framework governing the world's largest banks in a bid to prevent a collapse like that of Lehman Brothers.


By James Quinn in New York and Philip Aldrick
Published: 8:40PM BST 13 Sep 2009
President Barack Obama to push banking overhaul
President Obama will stress that regulators and legislators not only in the US, but around the world, need to take the next steps to tighten financial regulation Photo: GETTY

On the eve of the one-year anniversary of Lehman's liquidation filing , the US President will on Monday warn that there remains much to be done to ensure the problems of the last 12 months do not happen again.

Speaking just 10 days before the start of the G20 summit in Pittsburgh – at which world leaders are set to discuss curtailing bankers' bonuses among a raft of potentially restrictive reforms – he will also put the amount of capital banks hold on their balance sheets back at the top of the agenda, acknowledging that the demise of Lehman and Bear Stearns were a by-product of inadequate capital requirements.

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In a wide-reaching speech on the need for regulatory reform in order to avert another financial crisis he will call on the US Senate banking committee to kick-start work on these reforms as soon as possible.

Speaking from Federal Hall on Wall Street, just steps from the New York Stock Exchange, President Obama will stress that regulators and legislators not only in the US, but around the world, need to take the next steps to tighten financial regulation.

His comments will be closely watched by the banking fraternity on both sides of the Atlantic, eager to ensure that regulations do not become overly prohibitive.

Writing in The Daily Telegraph on Monday, Emilio Botin, chairman of Banco Santander, calls for national regulators to work together closely: "Recent events have shown us that banking regulation is useless if it is not accompanied by close supervision, capable of understanding and responding to changes and innovation in the sector. This is why banking supervisors must be even closer and more active."

Banking supervisors have been criticised for failing to recognise the volume of debt in the system at the peak of the boom and for letting banking excesses spiral out of control. Mr Botin goes on to write that the financial crisis "has its origins, in a large part, in weak banking supervision".

Larry Summers, the former Treasury Secretary who is now the US President's top economic aide, said that the reforms to be proposed will include the need to regulate institutions which have become so large that their collapse might threaten systemic stability.

Mr Summers also stressed that banks and other institutions should not be able to pick and choose who their regulator is, something which is a considerable cause for concern in the US.