Ahead of a visit to Washington to meet with Treasury Secretary Geithner, Michel Barnier, the EU Commissioner in charge of financial markets, sent a letter to the Secretary expressing concerns over the pace of U.S. banking regulation. As the Financial Times splashed across a headline above the fold, Barnier said that Brussels was moving faster than the U.S. in several key areas and that the U.S. must work quickly to tighten its banking rules. Barnier specifically mentioned capital requirements for banks and executive pay limits as areas where the EU will see a competitive disadvantage if the U.S. does not act soon. The letter said that “„bankers‟ bonuses‟ is a matter that continues to cause public outrage” and that “getting this matter right is key to restoring our citizens‟ confidence in the financial system—and ultimately their confidence in the public authorities regulating the financial institutions.”
The letter also highlighted concerns that the U.S. is uncommitted to Basel Commission implementation. While the EU implemented Basel II in 2006, the U.S. has yet to fully implement the standards. In regards to Basel implementation, Barnier said that the notion of a “level playing field must be a reality, not an empty slogan.” Barnier was expected to push Geithner on implementation and compliance with Basel III at their meetings this week.
In response, the U.S. Treasury released guidance on Secretary Geithner‟s schedule of meetings with Mr. Barnier. The guidance says that the two officials will “discuss the United States‟ intense focus on making certain that all key financial centers live up to the G-20‟s commitments on central clearing and trading of derivatives.” As the U.S. is farther along in implementing derivatives rules than the EU, the Financial Times reported this guidance as a “veiled counterattack” against the concerns in Mr. Barnier‟s letter. The guidance also said that Geithner will “underscore the U.S.‟s continued commitment to implementing our Basel agreements rigorously and on the agreed timelines, and our firm expectation that others do the same.”