Davos, Switzerland was the site of a major meeting today, bringing together the chief executive officers from many of the major banks. The leaders of Bank of America Corp (NYSE: BAC), Barclays Plc (NYSE: BCS), JPMorgan Chase (NYSE: JPM), UBS AG (NYSE: UBS), and Credit Suisse Group AG (NYSE: CS) convened behind closed doors to discuss regulation, political interventions, and sovereign debt.
While the World Economic Forum is underway close by, bringing together many respected economists from across the globe along with prominent political figures, the bank executives engaged in open discussions on the future of the markets they operate in. Credit conditions in Europe have been precarious since the Greece Debt crisis last May, and with Ireland already in trouble while suspicions surround Italy and Portgual, sovereign debt is at the forefront of everyone’s mind. Managing exposure to this will be critical in the coming months, as attractive yields could engage traders into the (currently) highly rated instruments.
The common themes of discussion included: Interplay and unintended consequences of proposals to regulate institutions; threats of sovereign debt default, fiscal weaknesses and contagion in the euro zone; reactions to policy makers’ increasing propensity to intervene in markets; financial innovation and appropriate institutional structures; and successful business in a low-yield environment.
Tidjane Thiam, CEO of insurer Prudential Plc commented during a break that the executives planned to ask Geithner for “more certainty” about regulation. “We are aware something needs to change,” Thiam said in an interview. The uncertainty that surrounds the future of US markets post Dodd Frank financial reform remains. Although some actions are clear, like shutting down prop trading, much of the minutia has been left to the lower regulators who are yet to state their interpretation of the mandate of new powers. Bankers and regulators are working together to attain “safety, regulatory certainty and economic growth,” said attendee Howard Lutnick, CEO of New York-based securities firm Cantor Fitzgerald LP. “If you just keep the first two you don’t get the third.”
Barclays Cheif Executive Robert Diamond commented “We had a good discussion and debate and we are looking forward to the session with policymakers.” The bankers’ session came ahead of a planned meeting with global regulators on Saturday.