BERLIN (Reuters) - Finance leaders of the world’s top economies have agreed to review banking rules, but this does not automatically mean hard-fought financial market regulation will be rolled back, Bundesbank President Jens Weidmann told Reuters on Sunday.
The new U.S. administration has argued that excessive bank regulation is holding back lending and economic growth, raising the prospect that rules could be loosened, putting efforts to finalise a new global banking accord, known as Basel III, at risk.
Answering questions after a two-day meeting of the G20 finance ministers and central bank governors in the German town of Baden-Baden, Weidmann said in written comments:
“At our meeting we agreed to look more closely at the actual impact of the reforms after the comprehensive regulatory efforts in the financial sector.”
The G20 members would review whether intended goals had been achieved and whether there were any unintended side effects of the jointly agreed banking rules, Weidmann said.
“But this is something quite different from rolling back the regulation,” Weidmann said.
The head of the German central bank said he had doubts that hopes would materialise that economic growth could be stimulated on a broad basis by rolling back financial market regulation.
“The financial crisis has shown us painfully what great overall economic damage can be inflicted through insufficiently regulated financial markets,” Weidmann said.
Asked if the G20 gathering in Baden-Baden revealed more conflicts than at previous meetings, Weidmann said: “Especially when differences of opinion exist, a forum such as the G20 proves to be particularly valuable. In this respect I would speak less of conflicts than of an open, helpful exchange of opinions and an intense struggle for a common position.”
Weidmann said it was clear that the G20 members still had a lot of discussions about trade and its role for prosperity ahead of them.
But he called it a success of the German G20 presidency that the financial leaders in Baden-Baden adopted a non-binding list of principles to boost the resilience of their economies against future shocks.
Acquiescing to an increasingly protectionist United States, the G20 finance ministers and central bank governors dropped a pledge in the main communique to resist protectionism and keep global trade open.
The failure of the world’s financial leaders to keep established language supporting free trade marks a setback for the G20 process and poses a risk for growth of export-driven economies such as host Germany.
Reporting by Gernot Heller; Writing by Michael Nienaber. Editing by Jane Merriman