New global banking rules set to be introduced over the coming decade do not solve the vexed question of liquidity requirements, HSBC’s outgoing chairman Stephen Green said yesterday.
“Very importantly, the question of liquidity has not been... conclusively solved. And of course it is as important as capital to banks. Liquidity matters as much as capital does. So there’s still work to be done,” he said.
“Nevertheless the direction (of the global reforms) has been right... I think it will lead to a more robust and stable financial system going forward,” added Mr Green, who is leaving HSBC to become Britain’s trade minister.
Seeking to avoid a repeat of the 2008 global financial crisis, central banks and regulators approved the “Basel III” regulations in September to come into effect from 2013 to 2019.
They require banks to raise hundreds of billions of dollars of fresh capital, to hold in reserve against any new tumult on financial markets.
But banks, including HSBC, fought against tighter regulations on the liquidity of their holdings, saying requirements to hold more easily accessible cash and government bonds could raise the cost of borrowing and choke off recovery.
Basel III liquidity rules set to take effect from 2015 could still be reviewed. The regulations appear on the main G20 summit’s agenda along with new rules on systemic risk and the biggest banks.
“Tomorrow’s discussions provide a direct opportunity for G20 heads of government to listen to our messages,” said Mr Green.
Global CEOs met in Seoul yesterday on the eve of the G20 gathering of the biggest rich and emerging economies, and will be addressed by world leaders including German Chancellor Angela Merkel today.
The business summit also discussed trade imbalances and currency valuations, issues over which world leaders are deeply divided.
William Fung, chairman of Hong Kong-based wholesale trader Li and Fung Group, said that currency valuations might be used to rectify trade imbalances.
“There are many kinds of imbalances. Perhaps the use of the currency is one way of solving some of those imbalances,” he said.
“My message is very simple. Please go back to the fundamentals of how we can create jobs and sustain growth. Perhaps currency is one way of solving it. It may not even be the best way.”