The worried response to US President Barack Obama’s plans to curb big banks and a British assault on bankers’ pay came as 2,500 business leaders and policy makers met at the World Economic Forum in the Swiss ski resort of Davos. Surveys produced for the annual conference showed global economic confidence on the rise after deep gloom in 2009 and a cautious return to hiring, especially in emerging markets. But the spectre of uncoordinated, heavy-handed regulation and government intervention in the economy was the biggest cloud on many business leaders’ horizon. Uncertainties over whether China will rein in its feverish pace of growth and concerns about how Greece will tackle its debt crisis also weighed.
Obama jolted markets on Jan. 21 with proposals to force commercial banks to cut ties with hedge funds and private equity funds and stop proprietary trading, and to make the financial sector pay for a massive taxpayer bailout. Barclays President Bob Diamond challenged Obama’s effort to limit the size of big banks and restrain risk-taking, telling the opening forum session: “I’ve seen no evidence that suggests that shrinking banks and making all banks smaller or more narrow is the answer.” “If you step back and say large is bad, and we move to narrow banking, the impact of that on banks and on global trade, the global economy, would be very negative.” Standard Chartered bank CEO Peter Sands said there was a growing risk that fragmented regulatory initiatives would “create enormous amounts of complexity” and encourage financial companies to arbitrage among regulators.
A study by accountancy giant PricewaterhouseCoopers showed business confidence bouncing back after the sharpest drop in economic activity since World War II prompting more industry leaders to start hiring again. The survey of 1,200 chief executives in 52 countries found 39 percent of industry bosses aimed to hire extra staff in 2010, while 25 percent planned more job cuts, down from nearly half who slashed jobs last year.
But recruitment will be on a modest scale and mostly in booming emerging economies such as China and India, rather than in the developed world, the report showed. Obama’s proposed curbs on Wall Street drew guarded support from European governments but could complicate efforts to build a global consensus on financial regulation in the G20 grouping of major economies. European Central Bank President Jean-Claude Trichet played down transatlantic differences, telling the Wall Street Journal the proposed US reforms were “relevant and interesting” and shared the same aims as European measures.
