By Michael Winfrey
PRAGUE, May 7 (Reuters) - The world's top financial groups
will unveil an industry response to the global credit crisis in
mid-July, the head of the leading international banking lobby
said on Wednesday.
Charles Dallara, head of the Institute of International
Finance (IIF), told Reuters it was "premature" to say the worst
of the global credit crisis was over, and this would only be
once the serious deterioration in the U.S. housing market had
ended.
The IIF is creating voluntary guidelines in a bid to
influence regulators' response to the banking industry's woes
and prevent a repeat of the credit crunch that has cost banks
over $300 billion in losses and sown financial turmoil around
the globe.
Dallara said the group was in close, informal consultations
with regulators over the list of self-policing commitments meant
to cover governance, risk management, transparency, executive
compensation, stress-testing and other issues.
"We will release our report in mid-July and we will then
continue our discussions with the regulators on a full range of
issues," he said during a visit to Prague.
Dallara stressed the lobbying body for 375 banks and
investment institutions was not seeking approval for its
guidelines and it was still debating whether to call them a
"code of conduct", "set of best practices", or something else.
"We would expect that the commitment to the principles would
take effect immediately after the announcement," he said. "I
would certainly expect the overwhelming bulk of recommendations
would be implemented and in place by year's end."
Last month, the G7 group of leading industrialised nations
endorsed a report from the Financial Stability Forum, which
comprises central banks and global regulators, calling for
tougher capital requirements, closer regulator cooperation,
improved risk management, and other moves to tighten norms.
COMPENSATION, CAPITAL
Dallara said he did not expect global regulators to tackle
compensation -- a sticky question after some banks gave large
payouts to executives and then reported huge losses and
writedowns as the credit crisis took hold.
"Both sides recognise this is an area that needs to be
addressed, but I think they are hoping that we in the industry
can take some meaningful initiative on its own," he said.
He added banks did expect regulators to adjust capital
requirements -- they have signalled they will target
off-balance-sheet items and structured instruments -- and the
IIF would discuss this with them in July in Basel, Switzerland.
"We don't know the magnitude, we don't know the calibration,
or the parameters, so we have to wait and see," he said. "We see
nothing in their signals that suggests anything that we are
exceptionally concerned about."
Dallara praised moves by central banks to staunch the credit
crisis. But he said the IIF had been encouraging Washington to
find a way to stabilise foreclosures among U.S. homeowners, and
the global financial system would not return to normal until the
housing market stopped deteriorating.
"In my view, until this is stabilised, either by market
forces themselves or with some degree of U.S. government
intervention, and that seems to be a possibility ... I don't
think we can be confident that the worst is over," he said.
