Leaders of both UK and international banks will seek reassurance from the minister that the UK windfall tax on bank bonuses is not the start of a concerted crackdown that will make London a less attractive place to do business.

Bob Diamond, the president of Barclays, on Wednesday strongly attacked Barack Obama’s plans to limit the size and scope of Wall Street banks. A new era of “narrow” banks would be harmful, Diamond warned: “The impact on jobs, global trade and the global economy would be very negative.” Peter Sands, the chief executive of Standard Chartered, will host talks at which bankers will voice their unhappiness at what they see as a populist attack on their industry.

He said on Wednesday there was a growing risk that fragmented regulation initiatives would “create enormous complexity” and encourage banks to play one regulator off against another.

Darling is expected to tell the bankers that while the government wants the G20 group of developed and developing nations to draw up plans for better financial regulation, it also wants the City of London (the UK financial services sector) to thrive. However, the chairman of the UK Financial Services Authority, Lord Turner, called yesterday for direct controls on the supply of credit to prevent the build-up of dangerous asset-price bubbles.

The determination of world leaders to reform financial markets after the crisis of the past two and a half years was underlined by the French president, Nicolas Sarkozy, on Wednesday night. Giving the keynote address to the World Economic Forum, he said there must be no return to the excesses of speculation and deregulation.

Congressman Barney Frank, an important US lawmaker on financial regulation, insisted countries were working together to toughen up the rules. “You can’t play mommy and daddy against each other now,” he said.

Some of Wall Street’s most high-profile chief executives, including Goldman Sachs’s Lloyd Blankfein and JP Morgan Chase’s Jamie Dimon, pulled out of this year’s Davos meeting. But Jacob Frenkel, the chairman of JP Morgan Chase International, said there was a danger of policy becoming too harsh. “We are falling into the trap of excessive interventionism, excessive protectionism,” the former Bank of Israel chief said.

Raghuram Rajan, professor of finance at Chicago University, said: “We are in danger of attacking the most visible problems instead of doing what we need to do. We could over-regulate and go too far, and whittle away too much.”

Copyright: Guardian News & Media 2010

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