By Douwe Miedema
WASHINGTON, April 22 (Reuters) - A U.S. plan to forceforeign banks to hold far more capital could sow discord amongsupervisors and lead to retaliation from abroad, European Unionfinancial services czar Michel Barnier said on Monday.
It was the second time in less than a week that EUmisgivings about Washington's aggressive stance in applyingdomestic rules on foreign banks became public.
"The (rule) would seem to represent a radical departure fromthe existing U.S. policy on consolidated supervision of (foreignbanks)," Barnier said in a letter to Federal Reserve ChairmanBen Bernanke, dated April 18.
"(It) may frustrate the efforts to ensure a consistentimplementation of the Basel III standards across jurisdictions,"Barnier also said, referring to a global accord on the maximumamount of money banks can borrow.
Politicians across the world cracked down on risky bankpractices in 2009 after the financial crisis, but many of therules are still not complete years later, and countries arehaggling about a rising number of issues.
The Fed in December launched a plan that would force foreignbanks to hold as much capital as U.S. banks, regardless of howtheir overseas parent companies are funded. The Fed did notimmediately respond to a request for comment.
The measure could be particularly costly for Deutsche Bank, Germany's flagship lender, and to a lesser degreefor the UK's Barclays, because of the corporatestructure of these two European banks.
The plan, authored by Fed Governor Daniel Tarullo, would bea breach with a U.S. tradition of relying on foreign supervisorsto watch overseas banks and allowing them to hold less equity inAmerica than their domestic counterparts.
In a separate April 18 letter, Barnier and a host of otherinternational regulators have also complained about U.S. rulesfor derivatives regulation to U.S. Treasury Secretary Jack Lew.
The U.S. derivatives regulator wants foreign banks to stickto the same rules for trading swaps as U.S. firms, but othercountries are urging it to rely more on the rules abroad, withinternational negotiations ongoing.
The pressure from Barnier came ahead of a meeting of the G20most powerful economies of the world this weekend, which touchedon certain financial regulation issues, such as the reform offinancial benchmarks.
The EU and the United States want to include the financialservices sector in a free trade agreement they are hammeringout, but this would take several years to complete, and anyissues now need to be resolved separately.
Barclays (BARC)
