Earlier this week, in a speech before the International Monetary Conference, Treasury Secretary Geithner stressed that efforts to delay or lessen the impact of financial regulation would hurt the financial industry. Geithner‟s remarks were aimed not only at Congress – which has several pieces of legislation aimed at delaying implementation of the Dodd-Frank Act in the works – but also at the banking community and international regulators. In making the case for prompt, strong regulation, Geithner cited the UK‟s “light-touch” financial rules before the banking crisis as one of the main factors causing the financial crisis.
Amid worries that increased U.S. regulation will put the U.S. financial sector at a competitive disadvantage, Geithner stressed that the UK example “should be a cautionary note for other countries deciding whether to try to take advantage of the rise in standards in the United States.” Similarly, Geithner made the case for a set of global standards to level the playing field and prevent regulatory arbitrage including regulation to increase systemic surcharge requirements for large financial institutions, create capital and leverage requirements and create international standards for margins on uncleared derivatives trades. Speaking about the international derivatives market, Geithner said it is important to take a “global approach on margins that will help reduce opportunities for regulatory arbitrage and prevent a race to the bottom on margin.”
CFTC Commissioner Bart Chilton also spoke this week, and echoed Geithner‟s comments about a level playing field, stating that regulatory arbitrage can be averted if European regulators and the U.S. harmonize plans for swaps oversight. Chilton said that “as long as there is a coordinated and comprehensive effort to harmonize financial regulations” business will not flee overseas. He also stressed that strong regulations will not destroy competitiveness but rather make the U.S., EU and other countries that join in on swaps and other regulation even more competitive.